Japanese Business Taxation Europe Newsletter · 2020-05-10 · Japanese Business Taxation Europe Newsletter Newsletter for Japanese Multinational Corporations operating in Europe

Japanese Business Taxation Europe

Newsletter

Newsletter for Japanese Multinational Corporations operating in Europe

Vol. 46 (10/2016 – 12/2016)

各位

拝啓

時下益々ご清栄のこととお喜び申し上げます。

Deloitte Japanese Business Tax Europe (“JBTE”) Team より JBTE Newsletter をお届け致します。

敬具

Dear Sirs / Madam,

We would like to send you our Japanese Business Tax Europe (“JBTE”) Newsletter.

Kind regards

Deloitte - JBTE Team

Japanese Business Taxation

Europe Newsletter

March 2016

Japanese Business Taxation Europe Newsletter Vol. 46

2

CLICK HERE FOR ENGLISH

日本語サマリー

※本ニュースレターは、英文の翻訳版です。日本語訳と原文（英文）に差異が生じた場合には、原文が優先されます。

ベルギー

移転価格文書化要件の導入

2016 年 12月 2日、新たな移転価格文書化要件を導入する勅令が交付された。これらの新移転価格文書化ルールは、2016年 1月 1日

以降に開始する多国籍企業グループの報告期間、もしくは、事業年度に適用される。概して、ベルギーは OECD のガイドラインに従うといえ、移転

価格報告の三層アプローチ（すなわち、マスターファイル、ローカルファイル、国別報告書）が今後義務付けられる。

詳細は英文テキストへ

フェアネスタックスは部分的に欧州法に抵触

2016 年 11月 17日、欧州司法裁判所法務官は待ち望まれたフェアネスタックス事案に関する意見を欧州司法裁判所より先に述べ、フェアネ

スタックスは部分的に欧州法に触れていると結論付けた。設立の自由に触れるものではなく、フェアネスタックスは親子会社指令第 5条において禁

止されている源泉税ではないとしながらも、再配当の際にフェアネスタックスを課される企業による受取配当と再配当についての親子会社指令第 4

条(3)に違反すると結論づけた。


EU親子会社指令及び出口課税制度の採用

新法案は以下の 2 つの措置を含む：

親子会社指令で規定されている通り、

(i) アンチ・ハイブリッド・ルールは 2016 年 1月 1日から遡及適用され、

(ii) 一般租税回避行為対策規定は各々2016 年 1月 1日と 2017年 1月 1日(源泉税一般租税回避行為対策規定)から遡及適

用される。

出口課税制度の改正(直接支払もしくは分割支払の選択)は評価年度 2017 年から適用される。


ベルギーの 2017年予算法を採択

ベルギー議会は以下の措置を含むベルギーの 2017年予算法を採択した。

2017 年 1月 1日より一般的な源泉税率を 27％から 30％に引き上げる

2017 年 1月 1日以降の拠出に対する「関連会社間キャピタルゲイン」に関した濫用対抗措置を導入する

2017 年 1月 1日以降発生したキャピタルゲインに対する投機税を廃止する

取引所取引に対するベルギー課税の「海外プラットフォーム」を拡大し、2017 年 1月 1日以降になされる取引の上限およびペナルティを引

き上げる

2017 年 1月 1日以降、雇用者が管理する燃料カードに関する税額控除を更に制限する


フランス

改正された 2016年度財政法案と 2017年度財政法案の承認

2016 年 12月 20日ならびに 22日、フランス議会は改正された 2016 年度財政法案と 2017 年度財政法案を承認した。法人税率減税

や、配当への付加税(3%)の免税対象の拡大といった多国籍企業に影響を与える重要なものが含まれている。



3

ドイツ

ドイツ議会がオーナーシップ変更ルールに係る追加的緩和案を承認

欠損企業の事業活動が、設立時からまたはオーナーシップ変更以前において少なくとも 3事業年度継続し変更していない場合には、申請により

オーナーシップ変更ルールに係る一般的な取扱い(繰越欠損金、繰越利子、当期損失の消滅の可能性)が適用されず、繰越欠損金等が消滅し

ないとされた。


BEPS 行動計画 5：有害税制への対抗

BEPS 行動計画 5 で示されたネクサスアプローチに基づかない IP スキームにより、受領者レベルで使用料収入に対する課税が減少する場合、関

係会社に対する使用料支払いの損金算入を制限する法案が公表された。


アイルランド

アイルランド 2016年財政法

2016 年財政法案は 2016 年 12月 25日、大統領により署名された。2016 年財政法は財務大臣が 2016 年 10 月 11日に発表した

2017 年度の税制予算案の大枠に沿う形となり、僅かな追加項目以外は想定内に収まった。ただし、金融機関に影響する新たな税務対策項

目も含まれることになった。この財政法の中の新たな税務対策項目は、いくつかの例外を除き、2017年 1月 1日からの施行となる。


米国・アイルランド間の租税条約に係る再交渉開始

アイルランドと米国は、最近更新された米国モデル租税条約(US モデル)と OECD の BEPS プロジェクトの勧告を踏まえ、米国・アイルランド間の

租税条約の再交渉について最初の議論を開始した。


アイルランド歳入庁の見解についての新たなガイダンスの発行

2016 年、アイルランドの歳入委員会は、歳入庁の見解または合意事項には最大で 5年間の有効期限があることを確認した。


イタリア

議会通過済みイタリア 2017年度予算法

当該法令には、みなし利子控除の変更、特定の有形固定資産に対する 40％超過償却の延長、ハイテク資産に対する 150％超過償却の導

入、研究開発（R&D）税額控除の延長などが含まれる。また、2016 年度予算法で定められた通り、法人税率は 2017 年 1月 1日より

27.5％から 24％に引き下げられる。


特定の中期・長期ローンに対する利子の取扱いについての説明

イタリア税務当局は、2016年 9月 29日付ルーリングにより、特定の中期・長期ローンに対する国内の源泉徴収税が免除される利子について

は、イタリア国内で財務収入として課税されず、また貸し手が非居住法人であればイタリアで税務申告不要であると説明した。


ルクセンブルグ

取締役報酬の VAT に関する取り扱い

ルクセンブルク VAT当局は取締役報酬の VAT に関する取り扱いのガイダンス及び FAQ の総覧（税務当局ウェブサイトにて仏語で公開）を

2016 年 9月 30日に公表した。2017 年 1月から適用が開始される Circular において、取締役報酬は VAT における課税対象者としての

経済活動を構成していると認めている。


4


2017年税制改革法の施行

2017 年税制改革法が 2016年 12月 27 日の官報に掲載された。


国別報告義務の施行

BEPS 行動 13 に沿ったルクセンブルクの国別報告（CbC）に関する法律が、2016 年 12月 26日の官報に公表され、2016 年より適用され

ている。ルクセンブルク税務当局は 2016 年会計年度の CbC報告通知のファイリング期限を 2017年 3月 31日まで延期している。従って当

該期日まで通知遅延によるベナルティは課されない。


新移転価格ガイダンス：ルクセンブルクをフィナンシャルセンターとしてプロモートするために

2016 年 12月 27日付けの官報において、ルクセンブルクは移転価格に関するルールを含む 2017年予算法を公表した。


オランダ

国別報告書の提出者の通知期限を延期

オランダ財務省は、財務副大臣が国別報告書の提出者の通知期限を延期したことを発表した。


オランダ連結納税制度の改正法案の公表

2016 年 12月 8日、オランダ連結納税制度（fiscal unity）を改正する法案が発表された。この法案は、2016 年 9月 28日に議会下

院、2016 年 11月 29日に上院で採択された。


アドバンス・ルーリングの自動情報交換に関する指令の実施に関する法案の公表

2016 年 12月 29日に、アドバンス・ルーリングの自動情報交換に関する指令の実施に関する法案が公表された。


スペイン

法人税の前納システムを変更

2016 年 1月 1日以降に開始の事業年度の純収益額が 10百万ユーロ以上の企業は、法人税の前納に関する新規定の対象となる。この新

規定は、2016 年 10月に該当する前納から適用される。


法人税増収の為の施策を導入

スペイン政府内閣は、累損や税務クレジットの利用制限や法人税控除の一部廃止により、法人税収を増加させる施策を承認した。施策の中に

は 2016 年 1月 1日以降に開始の事業年度に遡及適用されるものもある。


付加価値税情報のオンライン供給制度を導入

2016 年 12月 2日、スペイン政府内閣は付加価値税申告に関する情報をスペイン税務当局のオンライン・プラットフォームにアップロードすること

を義務付ける“付加価値税情報リアルタイム供給制度 (SII)”の導入を定める政令を承認した。この SII制度導入の主たる目的は、虚偽の付加


5

価値税申告の予防、そして税務当局による同税のコントロール強化である。SII制度は、主に月次で付加価値税申告が義務付けられている企

業を対象に、2017 年 7月 1日より導入される。


イギリス

2017年秋の財政演説

英国財務大臣フィリップ・ハモンドより新たな政府としては初めてとなる秋の財政演説が発表された。今回の財政演説でも、英国が「open for

business」であることが繰り返されており、その結果、底堅い英国の経済と税務制度に対する企業の信頼を支えることを目標とした内容となってい

る。UK事務所の特設サイト（UK Autumn Statement 2016: www.ukbudget.com）を参照のこと。


英国財政法案及び法人税法改正に係る意見募集結果への政府回答の公表

英国政府は 2016 年 12月 5日、先に実施された意見募集の結果を受けて、主に次の三つの分野に関する財政法案及び意見募集結果への

政府回答を公表した。

純支払利息の損金算入制限規定

欠損金控除に関する制度の改正

Substantial Shareholdings Exemption (“SSE”)


BACK TO TOP

http://www.ukbudget.com/


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CLICK HERE FOR JAPANESE

ENGLISH SUMMARY

BELGIUM

Belgium implements transfer pricing documentation requirements

On 2 December 2016 the Royal Decree implementing the new transfer pricing documentation requirements has

been published. These new transfer pricing documentation rules will apply to reporting periods of multinational

groups or accounting years starting as from 1 January 2016. In general, it can be concluded that Belgium

follows OECD guidance. Consequently, the three-tiered approach to transfer pricing reporting (i.e. Master file,

Local file and CbC reporting) will be mandatory going forward.

MORE

ECJ Advocate-General: fairness tax is partially incompatible with EU law

The ECJ Advocate-General issued the long-awaited opinion in the fairness tax case before the European Court

of Justice (“ECJ”) on 17 November 2016, concluding that the fairness tax partially violates EU law. The

conclusion is that there is no violation of the freedom of establishment and that the fairness tax is not a

prohibited withholding tax under Article 5 of the Parent-Subsidiary Directive (“PSD”). However, the Advocate-

General concluded that there is violation of Article 4(3) PSD for dividends received and redistributed by a

company subject to fairness tax upon redistribution.

MORE

Belgian adopts amended EU PSD directive and exit tax

The new law contains two measures:

Implementation of (i) the anti-hybrid rule retroactively as from 1 January 2016 and (ii) the general anti-

avoidance rule retroactively as from 1 January 2016 respectively 1 January 2017 (WHT GAAR) as provided

by the Parent-Subsidiary Directive (PSD); and,

Amendment of the exit tax regime as from assessment year 2017: choice between direct or spread

payment.

MORE

Belgian 2017 Budget Law Adopted

Belgian parliament adopted the Belgian 2017 Budget Law including the following measures:

Increase of the general withholding tax (“WHT”) rate from 27% to 30% as from 1 January 2017;

Introduction of the anti-abuse measure relating to “internal capital gains” for contributions made as from 1

January 2017;

Abolition of the speculation tax for capital gains realized as from 1 January 2017;

Extension of the Belgian Tax on Stock Exchange Transactions (TOB) to “foreign platforms” and increase of

caps and penalties for transactions made as from 1 January 2017; and,

Further limitation of tax deductibility of fuel cards in the hands of the employer as from 1 January 2017.

MORE

FRANCE

France finance bill 2017, amended finance bill 2016 passed

On 20 and 22 December 2016, the French parliament adopted the amending finance bill for 2016 and the

finance bill for 2017. Key measures relevant to multinationals include a progressive reduction in the corporation

tax rate and changes to the scope of the exemption from the 3% surtax on profit distributions.

MORE

GERMANY

German parliament approves additional relief from change-in-ownership rules

The general change-in-ownership rule (which may result in the forfeiture of net operating loss and interest

carry forwards, and current year losses) will not apply upon application where the business operations of the


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loss corporation continue and are unchanged from the earlier of the company’s date of incorporation or the

three fiscal years prior to the change in ownership.

MORE

BEPS Action 5: harmful tax practices

Draft legislation would limit the deductibility of related party royalty payments that would result in low-taxed

royalty income at the level of the recipient under an IP regime which is not based on the Action 5 “nexus

approach”. If approved, the proposed rule would apply to royalty payments due after 31 December 2017.

MORE

IRELAND

Finance Act 2016

The Finance Act 2016, was signed into law on 25 December 2016. It contained few surprises and largely

represented the measures announced by the Minister for Finance in the budget that was presented on 11

October 2016, in addition to some measures that would affect the financial services sector. Many of the

measures included in the Finance Act are effective as from 1 January 2017.

MORE

Renegotiation of the Ireland/US Double Taxation Treaty

Ireland and the United States have commenced initial discussions on the renegotiation of the US-Ireland tax

treaty in light of the recently updated US Model Income Tax Convention (US Model) and the OECD’s BEPS

project recommendations.

MORE

Revenue Opinions – New Guidance

In 2016 the Irish Revenue Commissioners confirmed that Revenue opinions / confirmations have a maximum

validity period of 5 years.

MORE

ITALY

Italy budget law for 2017 passed

Measures include changes to the notional interest deduction, the extension of the extra 40% depreciation for

certain tangible assets, the introduction of extra 150% depreciation for high-tech assets and an extension of

the research and development tax credit. Additionally, as provided by the budget law for 2016, the corporate

income tax is reduced to 24% (from 27.5%) as from 1 January 2017.

MORE

Treatment of interest on certain medium or long-term loans clarified

In a ruling dated 29 September 2016, Italy’s tax authorities clarified that if interest qualifies for the domestic

withholding tax exemption for certain medium and long-term loans, the interest is not subject to tax in Italy as

financial income and the non-resident lender is not required to file an Italian tax return.

MORE

LUXEMBOURG

VAT treatment of directors’ fees clarified

The Luxembourg VAT authorities published guidance on 30 September 2016 regarding the VAT treatment of

fees for director services, along with a comprehensive list of “frequently asked questions” (FAQ, available in

French on the tax authorities’ website). The circular, which will apply as from 1 January 2017, confirms that

director services constitute an economic activity that generally will make the director a taxable person for VAT

purposes.

MORE


8

Tax reform 2017 in force

Law implementing the 2017 tax reform was published in the official gazette on 27 December 2016.

MORE

Country by Country reporting in force

The Luxembourg law implementing CbC reporting, in line with BEPS action 13, was published in the official

gazette on 27 December 2016 and requires the first CbC reports to be filed for the 2016 fiscal year. The

Luxembourg tax authorities confirmed that the deadline for filing CbC reporting notifications for fiscal year 2016

is extended until 31 March 2017; accordingly, no penalty for late notifications will apply up to this date.

MORE

New TP Guidance: to promote Luxembourg as a financial centre introduced

Luxembourg’s 2017 budget law, published on 27 December 2016 in the official gazette, includes a new set of

rules for transfer pricing practices, in the form of a new article (article 56bis) of the Luxembourg Income Tax

Law (“LITL).

MORE

NETHERLANDS

Country by Country reporting notification extended

The Dutch Ministry of Finance has published a Decree in which the Dutch State Secretary of Finance announced

that he is postponing the deadline for the CbC reporting notification.

MORE

Bill to amend Dutch fiscal unity regime is published

On 8 December 2016, a bill to amend the fiscal unity regime was published. The bill had been adopted by the

lower house of the parliament on 28 September 2016 and by the upper house on 29 November 2016.

MORE

Bill on implementation of Directive on automatic exchange of information with respect to advance

tax rulings is published

On 29 December 2016, a bill on the implementation of the Directive on automatic exchange of information with

respect to advance tax rulings (the Bill) was published.

MORE

SPAIN

Spain amends system for advance CIT payments

Companies whose turnover exceeds €10 million are subject to new requirements for advance payments of

corporate income tax (CIT) for fiscal years beginning on or after 1 January 2016, including a minimum

payment. The new rules apply to prepayments from October 2016.

MORE

Spain introduces measures to raise corporate tax revenue

A tax package approved by Spain’s Council of Ministers aims to raise tax revenue through measures to increase

the corporate income tax liability of taxpayers operating in Spain (e.g. by limiting the use of losses and tax

credits and eliminating certain deductions); some of the measures apply retroactively for fiscal years beginning

on or after 1 January 2016.

MORE

New VAT reporting requirements introduced

On 2 December 2016, Spain’s council of ministers approved a royal decree that introduces a new system (SII),

under which taxpayers will be required to upload information about their VAT invoices to the tax authorities’


9

website. The key aim of the SII is to prevent VAT fraud and improve tax controls by the authorities. The SII will

become effective on 1 July 2017. However, taxpayers subject to the SII also will be required to submit invoices

relating to the first six months of 2017 (up to 30 June), although the deadline to submit this data will be

extended to 1 January 2018.

MORE

UNITED KINGDOM

UK Autumn Statement 2016

The new government’s first Autumn Statement reiterated the message that Britain is “open for business”, with

announcements targeted at supporting business confidence in the robustness of the UK economy and the tax

system. Detailed coverage and comment on the Autumn Statement is available from www.ukbudget.com

MORE

UK corporation tax reform consultation responses and draft legislation

On 5 December 2016, following consultations, the UK government issued consultation responses and draft

legislation in three key areas of corporate taxation:

Tax deductibility of corporate interest expense

Corporation tax loss relief reform

Substantial shareholding exemption (“SSE”)

MORE

BACK TO TOP



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ENGLISH FULL TEXT

BELGIUM

Belgium implements transfer pricing documentation requirements

On 2 December 2016 the Royal Decree implementing the new transfer pricing documentation requirements has

been published.

These new transfer pricing documentation rules will apply to reporting periods of multinational groups or

accounting years starting as from 1 January 2016. In general, it can be concluded that Belgium follows OECD

guidance. Consequently, the three-tiered approach to transfer pricing reporting (i.e. Master file, Local file and

CbC reporting) will be mandatory going forward.

Master and Local file

A Belgian entity of a multinational group will need to compile a Master file and a Local file when it exceeds one

of the following thresholds (on a non-consolidated basis) in the accounting year immediately preceding the last

closed accounting year:

combined operating and financial income of EUR 50 million (excluding non-recurring income);

a balance sheet total of EUR 1 billion;

annual average number of 100 FTEs.

Both the Master and Local files will have to be filed in specific forms, which have been published in the Royal

Decree of 2 December 2016.

The Local file consists of two forms:

One form that includes information on the type of activities performed by the Belgian group entity and an

overview of the relevant intercompany transactions (Part 1);

One form that, per business unit of the Belgian group entity, includes a detailed transfer pricing analysis for

each (type of) intercompany transaction of that business unit (Part 2).

The economic analysis only needs to be included if intercompany transactions of one business unit exceed EUR

1 million. Business unit is defined as: “each part, division or department of the Belgian group entity, grouped

around a certain activity, product group or technology”

The Local file needs to be filed together with the corporate income tax return:

Part 1 (General information form): enters into force for accounting years starting on 1 January 2016 or

later (for most Belgian subsidiaries of Japanese groups as from accounting year starting on 1 April 2016

and closing on 31 March 2017 implying that Part 1 of the Local File should be ready by 30 September

2017);

Part 2 (Detailed information per business unit): enters into force for accounting years starting on 1 January

2017 or later (for most Belgian subsidiaries of Japanese groups as from accounting year starting on 1 April

2017 and closing on 31 March 2018 implying that Part 2 of the Local File should be ready by 30 September

2018).

It is, however, recommendable and best practice to target preparation of Part 2 of Local File also by 30

September 2017 since this detailed information will support the arm’s length nature of the inter-company

transactions described in Part 1.

The Master file form will have to be filed within 12 months after the reporting period of the multinational group

with the Belgian tax authorities; the Local file form will need to be submitted together with the corporate

income tax return.

Country by Country

A CbC report must be filed in Belgium within 12 months after the final date of the multinational group’s

reporting period, if the group’s “ultimate parent entity” is located in Belgium. Even if the “ultimate parent


11

entity” is not located in Belgium, a Belgian group entity can be required to file a CbC report under certain

circumstances (e.g. where the jurisdiction of the “ultimate parent entity” does not require a CbC report to be

drawn up). This however is not the case if the multinational group appoints a “surrogate parent entity” within

the group to file the CbC report in its tax jurisdiction, when certain conditions are fulfilled. The CbC report is

only due when the consolidated gross revenue exceeds EUR 750 million in the reporting period immediately

preceding the last closed reporting period.

If the CbC report is due and will be filed by the ultimate parent entity or a surrogate parent entity, the Belgian

subsidiary (or branch) will have a notification obligation and will have to send a notification mentioning the CbC

reporting entity to [email protected] before the end of the accounting year. The notification deadline for

first year is delayed until 30 September 2017.

ECJ Advocate-General: fairness tax is partially incompatible with EU law

The ECJ Advocate-General issued the long-awaited opinion in the fairness tax case before the European Court

of Justice (“ECJ”) on 17 November 2016, concluding that the fairness tax partially violates EU law. The

conclusion is that there is no violation of the freedom of establishment and that the fairness tax is not a

prohibited withholding tax under Article 5 of the Parent-Subsidiary Directive (“PSD”). However, the Advocate-

General concluded that there is violation of Article 4(3) PSD for dividends received and redistributed by a

company subject to fairness tax upon redistribution.

A final decision by the European Court of Justice is still awaited.

Belgian companies and branches having paid fairness tax will have to closely monitor the final decision of the

ECJ as well as the subsequent decision of the Belgian Constitutional Court (which referred the case to the ECJ)

in view of safeguarding its rights of claiming reimbursement of fairness tax paid (depending on the outcome of

the final decisions of ECJ and Belgian Constitutional Court).

Belgian adopts amended EU PSD directive and exit tax

The new law contains two measures:

Implementation of (i) the anti-hybrid rule retroactively as from 1 January 2016 and (ii) the general anti-

avoidance rule retroactively as from 1 January 2016 respectively 1 January 2017 (WHT GAAR) as provided

by the Parent-Subsidiary Directive (PSD); and,

Amendment of the exit tax regime as from assessment year 2017: choice between direct or spread

payment.

Implementation of amended PSD

The anti-hybrid rule - included in the PSD in 2014 - is designed to prevent deduction/non-inclusion mismatches

resulting from hybrid instruments issued between related companies in EU member states (i.e. situations of

double non-taxation) by requiring the member state of the parent company to tax payments received on hybrid

instruments when such income has or can be deducted from profits in the member state of the subsidiary.

The general anti-avoidance rule (GAAR) - included in the PSD in 2015 - is designed to prevent tax avoidance by

requiring member states to deny the dividend withholding tax exemption under the PSD in cases where tax

avoidance is involved.

To implement the anti-hybrid rule in Belgian tax law, the “subject-to-tax” requirements of Belgium’s dividends

received deduction (DRD) regime have been expanded to include a provision stipulating that the DRD is not

available insofar the payer of the dividends can or has deducted these dividends from its profits.

To implement the GAAR in Belgian tax law, both the subject-to-tax requirements of the DRD regime and the

provisions relating to withholding tax have been amended to deny the application of the DRD or withholding tax

exemption for dividends that are - in essence - related to a legal arrangement or series of arrangements

deemed by the Belgian tax authorities (i) to be artificial (i.e. not set up for valid business reasons that reflect

economic reality), and (ii) that have been put in place with one of the main purposes being to obtain one of the

benefits of the PSD in another EU member state.

Entry into force:


12

The new DRD rules apply to dividends paid or attributed as from 1 January 2016; and,

The WHT GAAR applies to dividends paid or attributed as from 1 January 2017.

Deferral regime for payment of exit tax

The second half of the new law relates to Belgium’s exit tax rules, which subject companies transferring their

seat or assets from Belgium to another EU member state without maintaining assets in a Belgian permanent

establishment to immediate and final taxation.

Taxpayers can opt to pay the exit tax immediately or in equal instalments over a five-year period provided

(“spread payment”) that the assets are maintained within a company or a foreign establishment located in

another member state of the European Economic Area (i.e. the European Union + Norway and Iceland, but not

Liechtenstein as it is not yet party to the agreement on the mutual assistance in the recovery of taxes).

In case of spread payment the Belgian tax authorities can require a guarantee if there is a risk of non-recovery.

The taxpayer must each year complete a form with information related to the follow-up of the assets

concerned. In certain circumstances (sale of the assets, assets leaving the EEA, etc.), the remaining tax liability

becomes immediately due. No tax increase will apply if no prepayment of the exit tax is made.

Entry into force: as from assessment year 2017 and applicable to transactions made as 8 December 2016.

Belgian 2017 Budget Law Adopted

Belgian parliament adopted the Belgian 2017 Budget Law including the following measures:

Increase of the general withholding tax (“WHT”) rate from 27% to 30% as from 1 January 2017;

Introduction of the anti-abuse measure relating to “internal capital gains” for contributions made as from 1

January 2017;

Abolition of the speculation tax for capital gains realized as from 1 January 2017;

Extension of the Belgian Tax on Stock Exchange Transactions (TOB) to “foreign platforms” and increase of

caps and penalties for transactions made as from 1 January 2017; and,

Further limitation of tax deductibility of fuel cards in the hands of the employer as from 1 January 2017.

Recap: Belgium’s federal government reached an agreement on the 2017 budget on 14 October 2016, with the

tax measures confirmed by the prime minister and the finance minister:

Increase of the standard withholding tax rate from 27% to 30% (implemented).

Introduction of a new anti-abuse measure relating to "internal capital gains" to close the loophole that

allows an individual shareholder to avoid dividend withholding tax by contributing the operating shares of

his/her own company into a holding company (implemented). Indeed, in line with the bill, the difference

between the fair market value and the acquisition value of the shares cannot be repaid to the shareholder

by way of a tax free capital decrease (as opposed to the fiscally paid-in capital.

Abolishment of the speculation tax (implemented). This tax, which became effective on 1 January 2016, is

levied on capital gains derived by Belgian resident individuals (and non-resident individuals where the gains

are realized by a Belgian intermediary) on sales of certain quoted financial instruments acquired less than

six months before the sale, and on short sales.

Extension of TOB to also cover “foreign platforms” and increase of caps for shares, bonds and funds and

penalties (implemented). The stock exchange tax rates will however remain unchanged.

Further restrictions on the tax deductibility of fuel cards in the hands of the employer (implemented).

As an alternative to the provision of a company car (or other means of transportation), an employee will be

able to opt for additional net salary (still to be implemented).

Tax (and social) benefits will be linked to a minimum period of employment and/or residence in Belgium

(still to be implemented).

Several measures will be introduced to tackle tax and social fraud.

No agreement has been reached yet on three structural measures: (1) corporate tax reform; (2) taxation of

private capital gains on shares; and (3) support measures to boost investment (for start-ups and small and

medium-sized enterprises). These measures are still being discussed within the Belgian government.


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BACK TO TOP

FRANCE

France finance bill 2017, amended finance bill 2016 passed

On 20 and 22 December 2016, the French parliament adopted the amending finance bill for 2016 and the

finance bill for 2017. Key measures relevant to multinationals include a progressive reduction in the corporation

tax rate and changes to the scope of the exemption from the 3% surtax on profit distributions.

The government intends to continue to take steps to reduce the public deficit, while setting up a pay-as-you-

earn (PAYE) system as from 2018 (one of the promises made during Hollande’s presidential campaign) and

refining a number of tax reduction measures benefitting both enterprises and individuals that were introduced

by the government over the past few years. The finance bills also contain measures to ensure that provisions in

the French tax code are in line with the French constitution and EU law. The French constitutional Court has

approved the Finance Bill for 2017 and the Amended Finance Bill for 2016 on 29 December 2016, and the

finance bills have entered into force.

Corporate income tax rate reduction

The corporate income tax rate will be progressively reduced from the current 33.33% to 28% over the period

2017 to 2020. The existing 15% reduced tax rate will be maintained for companies whose turnover does not

exceed EUR 7.63 million, but only for the first EUR 38,120 of taxable income, and in 2019 will be extended to

apply to small and medium-sized enterprises (SMEs).

Provisional timetable:

2017: The reduced 28% rate will apply only to SMEs with turnover of less than EUR 50 million, but only on

the first EUR 75,000 of taxable income.

2018: The 28% rate will apply to the first EUR 500,000 of profits for all companies.

2019: The 28% rate will be extended to apply to all profits of companies with annual turnover of less than

EUR 1 billion (the threshold will be determined at the level of a tax consolidated group, where applicable),

and for companies with annual turnover of more than EUR 1 billion, but only for the first EUR 500,000 of

profit.

2020: The 28% rate will become the standard corporate income tax rate.

Extension of exceptional depreciation regime

Under the exceptional depreciation regime, companies subject to corporate income tax are entitled to an

additional deduction from their taxable income, equal to 40% of the original cost (excluding financial expenses)

of eligible assets that are used for the company’s business. The regime originally applied to assets acquired or

manufactured by the company between 15 April 2015 and 14 April 2016 and recently was extended to goods

purchased or produced before 14 April 2017.

The scope of the exceptional depreciation regime now will be extended to allow goods ordered before 14 April

2017 to benefit from the regime, provided the order is accompanied by the payment of at least 10% of the

total price and the actual acquisition takes place within 24 months of the order.

Enhanced tax credit for competiveness and employment (CICE)

The rate of the CICE will increase from 6% to 7% for 2017. The CICE is based on wages an entity pays to its

employees over the calendar year. The wages paid are taken into account in calculating the CICE (i.e. the

credit is calculated on the portion of gross payroll not exceeding 2.5 times the national minimum wage). The

CICE generates a receivable against the French treasury, which may be offset against the entity’s corporate

income tax liability or refunded after three years.

Scope of exemption from 3% surtax on profit distributions

The exemption from the 3% surtax on profit distributions will be maintained but the scope of the exemption will

be broadened to apply to distributions made by French subsidiaries to their foreign parent companies, provided


14

a 95% ownership requirement is met, regardless of whether the foreign parent is resident within or outside the

EU.

The new scope will apply to distributions made on or after 1 January 2017. The current exemption from the 3%

surtax applies only to distributions made within a French tax-consolidated group (which may only have French

members). The exemption has been subject to criticism because it results in the different tax treatment of

resident parent companies that directly or indirectly hold at least 95% of the capital of the distributing

subsidiary (which qualify for the exemption) and non-resident parent companies in the same situation (which

do not qualify for the exemption).

The constitutional court ruled on 30 September 2016 that the exemption from the 3% surtax violates the

equality principle in the French constitution because the different tax treatment cannot be justified by the

difference in situations or by reason of the public interest. Thus, to end the different treatment, the legislature

decided to extend the exemption to apply to distributions made by French subsidiaries to their parent company,

regardless of whether the parent company is French or foreign, resident within or outside the EU, provided a

95% ownership requirement is met. The foreign parent company must be able to meet the 95% ownership

requirement (directly or indirectly) for being a member of the same tax-consolidated group as the distributing

company had it been established in France.

In addition, the non-resident parent company must be subject to corporate income tax (equivalent to the

French impôt sur les sociétés) and must be located in a country that has concluded a treaty containing an

administrative assistance clause with France, excluding non-cooperative states or territories (NCSTs).(An NCST

is a jurisdiction that is not an EU member state and has not concluded a treaty with France (or with at least 12

other jurisdictions) that includes an administrative assistance provision regarding tax matters.)

The broadening of the scope of the exemption only eliminates the element of the surtax that the constitutional

court found to be incompatible with the equality principle in the constitution. The government did not take the

opportunity to fully revise the basic premise of the surtax, which may not stand up to the scrutiny of the Court

of Justice of the European Union (CJEU) (particularly if the CJEU agrees with the recently released opinion of

Advocate General Kokott who found that the Belgium fairness tax—which involved issues similar to those raised

by the French surtax—to be partly incompatible with the EU parent-subsidiary directive); the CJEU is expected

to rule on the French 3% surtax sometime in 2017.

Eligibility for participation exemption

Following a 3 February 2016 decision of the constitutional court, eligibility for the benefits of the participation

exemption for dividends no longer requires that the parent company hold the voting rights of the distributing

subsidiary, i.e. dividends from shares with no voting rights will also be eligible.

The French tax authorities already changed their official administrative guidelines in this respect, with the

changes taking effect on 3 February 2016.

The amending finance bill for 2016 provides for the abolition of the voting rights requirement, and even if the

amended bill does not provide a specific effective date, the abolished requirement can be invoked as from 3

February 2016.

The above eligibility for the participation exemption for shares without voting rights will not have any

consequences on the participation exemption for capital gains. However, a requirement is introduced that the

parent company must hold at least 5% of the voting rights of certain shares of the subsidiary to benefit from

the exemption. This rule applies to fiscal years beginning on or after 1 January 2017.

Financial transaction tax increased and scope expanded

Effective on 1 January 2017, the rate of the French financial transactions tax will increase from 0.2% to 0.3%,

and the scope of the tax will be extended to apply to intraday transactions as from 1 January 2018.

BACK TO TOP


15

GERMANY

German parliament approves additional relief from change-in-ownership rules

The general change-in-ownership rule (which may result in the forfeiture of net operating loss and interest

carry forwards, and current year losses) will not apply upon application where the business operations of the

loss corporation continue and are unchanged from the earlier of the company’s date of incorporation or the

three fiscal years prior to the change in ownership.

The tax bills containing measures that introduce CbC reporting, amendments to the change-in-ownership rules

and the introduction of an anti-double dip rule were published in Germany’s federal gazette on 23 December

2016, following approval by the upper house of parliament on 16 December 2016. The CbC reporting rules

apply as from 1 January 2017 and the measures relating to the change-in-ownership apply retroactively to

ownership changes taking place after 31 December 2015. The anti-double dip rule applies to interest payments

made after 31 December 2016.

The law introducing CbC reporting is based on the recommendations in the OECD’s BEPS final report on action

13 and the amendments to the EU administrative cooperation directive. The CbC reporting rules apply for fiscal

years beginning after 31 December 2015 (except for the “secondary mechanism,” which will apply only for

fiscal years beginning after 31 December 2016). An obligation to prepare a master file for transfer pricing

documentation purposes also is introduced.

Also introduced is additional relief from the onerous change-in-ownership rules. (The change-in-ownership rules

can result in the partial resp. full forfeiture of net operating loss (NOL) carry forwards, interest carry forwards

and current year losses in cases involving a direct or an indirect transfer of more than 25% resp. 50% of the

shares in a company to one new acquirer, related parties or parties acting in concert.) Based on a new section

in the Corporate Income Tax Code, the rules will not apply where the business operations of a loss corporation

continue and are unchanged from the earlier of the company’s date of incorporation or the three previous

calendar years before the change in ownership took place. If these conditions are fulfilled and the taxpayer

submits an application to the tax authorities to apply the relief, the regular NOL carry forward will be converted

into a “business continuance NOL carry forward” that will be available for use under the general rules for NOL

carry forwards. However, the carry forward will be forfeited if one of the following occurs:

The business operations are discontinued, either temporarily or permanently;

The purpose of the business operations changes;

Additional business operations are taken over;

The company becomes a partner in a partnership;

The company becomes a controlling parent entity in a tax-consolidated group; or

Assets are transferred to the loss company at a value below fair market value for tax purposes.

The relief also does not apply if one these events occurred in the previous three calendar years before the

ownership change.

Unlike the original proposal for the business continuance NOL carry forwards rule, the final version of the rule

will not apply to NOL carry forwards that result from discontinued or dormant business operations of the

company. The rule also will not apply if the company was a controlling entity in a tax group or a partner in a

partnership during the three-year monitoring period before the “harmful” ownership change.

As noted above, the new relief measure applies retroactively for ownership transfers taking place after 31

December 2015, and applies for both corporate income tax and trade tax purposes.

Finally, the law includes an “anti-double dip” rule for partnership structures. Under German tax law, interest

expense incurred at the level of a partner of a partnership that is linked to the partnership business (e.g.

interest expense related to the acquisition of the partnership interest) is treated as a “special business

expense” and is deductible for tax purposes at the level of the partnership. If the partner is a non-resident, the

partner becomes subject to limited German tax liability on its income from the partnership (a partnership is

transparent for German corporate income tax purposes). The interest expense that qualifies as a special

business expense, therefore, is deductible for German tax purposes, but also may be simultaneously deductible

for foreign tax purposes at the level of the partner. The deduction of such special business expenses of a

partner in a partnership are disallowed to the extent such expenses are also tax deductible in a foreign


16

jurisdiction. To the extent these expenses relate to income that also is taxed in a foreign jurisdiction, the

expenses remain deductible.

The government still has not issued a draft law regarding the long-awaited anti-hybrid rule (which was

proposed in 2014, but has not been passed). Whether a first draft can be expected in 2017 likely will depend

on the progress on the proposed amendments to the EU anti-tax avoidance directive with regard to third-

country financing arrangements and on the German federal elections that will take place in September 2017.

BEPS Action 5: harmful tax practices

Draft legislation would limit the deductibility of related party royalty payments that would result in low-taxed

royalty income at the level of the recipient under an IP regime which is not based on the Action 5 “nexus

approach”. If approved, the proposed rule would apply to royalty payments due after 31 December 2017.

Germany’s Ministry of Finance (MOF) published a first draft of a law on 19 December 2016 that would limit the

deductibility of certain related party royalty payments. Specifically, the draft law would apply to royalty

payments that result in the "low taxation" of the royalty income at the level of the recipient due to the

application of an IP regime (IP box, patent box, license box, etc.), in situations where the IP regime is not

based on the “nexus approach” described in action 5 of the OECD BEPS project. If approved, the proposed rule

would apply to royalty payments that become due after 31 December 2017.

The draft law targets beneficial “non-nexus”-based IP regimes; low taxation (or no taxation) of royalty income

based on the general taxation of the recipient would not be within the scope of the proposed rules. The

restriction on deductibility would apply only to royalty payments between related parties; payments made to

unrelated parties would not be affected.

The draft law also targets payments to indirect recipients that benefit from a non-nexus-based IP regime

resulting in low taxation. This measure would disallow deductions in back-to-back royalty structures where only

an indirect recipient benefits from such a regime.

“Low taxation” for purposes of the draft law generally would mean an effective tax rate of less than 25%.

However, low taxation would not automatically result in a disallowance of a full deduction of the royalty

payment. The percentage of the disallowed royalty payment would be calculated based on the applicable tax

benefit at the level of the recipient (i.e. the difference between the applicable tax rate and a 25% tax rate).

“Nexus-based” preferential tax regimes that would fall outside the scope of the proposed rule include those

regimes whose benefits depend on a substantial economic activity. The draft law provides that a substantial

economic activity would not exist where the recipient of the royalty payment did not fully or predominantly

develop the underlying IP in its own business operations (e.g. if the IP was developed by related parties or

acquired).

The draft law provides an exception from the restrictions for payments regarding trademark rights.

The MOF has asked interested parties to provide comments on the draft by 11 January 2017, and the

government is expected to decide whether to move forward with this initiative on 25 January.

BACK TO TOP

IRELAND

Finance Act 2016

The Finance Act 2016, was signed into law on 25 December 2016. It contained few surprises and largely

represented the measures announced by the Minister for Finance in the budget that was presented on 11

October 2016, in addition to some measures that would affect the financial services sector. Many of the

measures included in the Finance Act are effective as from 1 January 2017 (with some exceptions, as noted

below).

Some of the measures announced in the budget that were provided for in the Finance Act include:


17

A capital gains tax relief scheme for entrepreneurs, which would provide for a tax rate of 10% (reduced

from 20%) on gains of up to EUR 1 million arising from disposals of qualifying businesses after 1 January

2017;

Changes in the foreign earnings deduction and special assignee relief program;

In addition to the measures announced in the budget, the Finance Act includes a number of

additional/amended provisions worthy of comment:

Changes relating to CbC reporting to transpose the EU directive regarding the mandatory automatic

exchange of information into Ireland’s domestic law. The changes gave Irish Revenue the power to issue

regulations in relation to the appointment of an EU-designated entity that could file a CbC report on behalf

of all EU constituent entities of a non-EU-parented group. In addition, Irish Revenue has been given the

power to make regulations in respect of notification requirements for such an EU-designated entity that is

tax resident in Ireland. In this regard SI 653 was published by Irish Revenue on 28 December 2016.

With respect to the automatic exchange of advance cross-border rulings, the Finance Act permits the Irish

competent authority to disclose certain supplementary information to other EU member states along with

advance cross-border rulings or advance pricing arrangements (APAs). Advance cross-border rulings and

APAs have the same meaning as defined in the relevant EU directive.

The supplemental information that could be provided in this regard includes:

o The main business activity;

o Annual turnover;

o Annual profits or losses;

o The address of the taxpayer; and

o In the context of APAs, where more than one transfer pricing methodology is used, an explanation as to

why more than one methodology was used.

These changes will have an impact on multinational groups with APAs or advance cross-border rulings that are

subject to the automatic exchange of information provisions. Companies affected by the changes should

consider any increased tax risk resulting from the additional information likely to be disclosed along with

advance cross-border rulings and APAs; the latter change would enter into effect on the date that the Minister

for Finance may appoint by order.

Financial services measures

The Finance Act includes an amended version of the previous draft legislation for changes in relation to

securitisations (S.110 TCA 1997) and amendments to the existing funds legislation.

Changes to S110 Legislation

The effect of the amendments to section 110 is to treat the holding and/or managing of assets (“specified

property business”) held by a securitization vehicle that derive their value directly or indirectly from Irish land

and property (“Irish property-related assets”) as a separate business within the vehicle. This would mean

apportioning income, profits, gains and expenses to that separate business on a just and reasonable basis.

It is important to note that the legislation includes a specific exclusion from the amended legislation for

collateralized loan obligation transactions, commercial mortgage-backed security and residential mortgage-

backed security transactions and loan origination business (as defined). These exclusions are welcome and

should assist in removing a number of genuine securitization transactions from the revised provisions.

The amendments apply to accounting periods commencing after 6 September 2016. Where a company’s

accounting period begins before that date and ends after that date, the accounting period will need to be

divided into two parts.

Irish Real Estate Funds

New legislation has been introduced to amend the existing funds tax regime, broadly, to provide for a 20%

withholding tax on payments to certain persons by an IREF (Irish real estate fund). An IREF is a fund or sub-


18

fund of a fund that derives 25% or more of its market value directly or indirectly from Irish land and property

(or assets that derive their value from Irish land or property) or, if the latter is not applicable, where it would

be reasonable to consider that one of the main purposes of the fund was to acquire Irish land and property (or

assets that derive their value from Irish land or property).

The 20% tax will apply on the making of a relevant payment by the IREF or on the redemption of units, to the

extent that the amount of the redemption is attributable to IREF profits. Certain unit-holders are excluded from

the provisions, including certain Irish pension arrangements or PRSAs, Irish funds and life funds and

EU/European Economic Area-regulated funds, pension funds and life funds subject to certain anti-avoidance

provisions.

The amended legislation will apply for accounting period commencing on or after 1 January 2017.

Comments

The Minister for Finance has acknowledged the importance of Ireland’s financial services sector. The minister

stated that the proposed amendments are not designed to attack the sector, but merely to ensure that certain

financial services vehicles are being used in the areas that originally were envisioned. The changes were

carefully drafted to provide as much certainty as possible to the sector, while still ensuring the Irish tax base is

protected from erosion. The changes in the S110 and fund legislation outlined above are significant where the

assets of the entity or sub-fund derives its value from Irish property and land. However, S110 companies and

funds that do not invest in Irish real estate-related assets should not be affected by these changes.

Renegotiation of the Ireland/US Double Taxation Treaty

Ireland and the United States have commenced initial discussions on the renegotiation of the US-Ireland tax

treaty in light of the recently updated US Model Income Tax Convention (US Model) and the OECD’s BEPS

project recommendations. Ireland also opened a public consultation, requesting written comments on the US

Model and aspects of the current US-Ireland tax treaty from an Irish perspective.

Revenue Opinions – New Guidance

In 2016 the Irish Revenue Commissioners issued e-briefs 79 and 89 confirming that Revenue opinions /

confirmations have a five year duration. On 26 January 2017 Revenue issued e-brief no. 8 / 2017 that brings

about a form of “self-assessment” procedure which notes as follows:

“It is Revenue policy that all opinions / confirmations issued by Revenue are subject to a maximum validity

period of 5 years, or such shorter period as may have been specified by Revenue when providing the

opinion/confirmation. A taxpayer or tax practitioner who wishes to continue to rely on an opinion issued before

1 January 2012 for any transaction, or the whole or part of any period, after 1 January 2017, must:”

Supply evidence of the opinion / confirmation, being a copy of a written communication which originated

from Revenue, and

Lodge a full application for the renewal or extension of the opinion/confirmation with the Revenue District

dealing with the taxpayer’s affairs by 30 June 2017

As a result taxpayers who have such opinions/confirmations must notify Revenue of opinions being relied upon

and which they want to continue to rely on where they were received more than five years after their issue.

What is a Revenue opinion?

Revenue note that an opinion on a particular matter will only be provided where the issues are complex,

information is not readily available or there is genuine uncertainty in relation to the applicable tax rules as set

down in the legislation. Therefore, an opinion provides Revenue’s view of the application of tax law to a

particular situation.

The following examples are types of opinions that a taxpayer might wish to continue to rely on (given as part of

the notes accompanying e-brief no.8 of 2017) as follows,

The existence or non-existence of a permanent establishment in the State

Profit attribution or transfer pricing methodology


19

Trading status

Residence status

Revenue further note that the above list is only intended to be illustrative rather than an exhaustive list of

opinions that may have continuing relevance.

BACK TO TOP

ITALY

Italy budget law for 2017 passed

Italy’s budget law for 2017, published in the official gazette on 22 December 2016, makes a number of

significant changes to the country’s tax rules, including changes to the notional interest deduction (NID), the

extension of the extra 40% depreciation for certain tangible assets, the introduction of extra 150% depreciation

for high-tech assets, several opportunities for Italian companies to obtain beneficial treatment and an extension

of the research and development (R&D) tax credit. Unless otherwise noted, the changes described below are

effective as from 1 January 2017.

Additionally, as provided by the budget law for 2016, the corporate income tax is reduced to 24% (from

27.5%) as from 1 January 2017.

Notional interest deduction (NID)

The new rate for the NID—the corporate income tax deduction computed as a percentage of the annual

increase in a company’s equity (from new cash contributions and retained earnings)—is 2.3% for 2017

(reduced from 4.75%) and 2.7% for 2018 and thereafter.

Under a new limitation introduced by the budget law, the NID may be reduced based on the increase of

investments in securities and financial instruments other than participations, as compared to the amount shown

in the financial statements for 2010.

Similar limitations to those that apply to the carry forward of net operating losses (and excess interest) in the

case of a change of control or merger/demerger also will apply to the excess NID (i.e. the NID that exceeds the

tax base for the year and generally can be carried forward):

In the case of a change of control, no carry forward will be allowed if, in the year of the change of control

or in the two preceding or following periods, the business activity of the company is modified; and

In the case of a merger/demerger, a carry forward will be allowed up to the amount of the net equity value

shown in the last approved financial statements or (if lower) in the interim balance sheet, reduced by any

capital increases in the prior 24 months, as long as the revenue and labour costs recorded in the fiscal year

preceding the merger/demerger are at least equal to 40% of the average of the two previous fiscal years.

Additional depreciation for certain assets (“super depreciation”)

The budget law extends the extra 40% depreciation deduction (i.e. total tax depreciation of up to 140% of the

cost) for tangible assets whose depreciation rate for tax purposes exceeds 6.5%. The measure now will be

applicable to new assets that are purchased (or leased under a finance lease agreement) by 31 December 2017

(however, real estate assets, pipelines, “rolling stock,” airplanes and—as from 2017—company cars are

excluded from the benefit). Assets that are purchased by 30 June 2018 may benefit from the additional

depreciation, provided the relevant purchase order is made and at least 20% of the purchase price actually is

paid by 31 December 2017.

The extra 40% depreciation deduction also will be extended to apply to new intangible assets (i.e. software,

systems, platforms, etc.) related to the technological transformation mentioned below (the “Industry 4.0”

plan).

Extra depreciation for certain high-technology assets (“hyper depreciation”)


20

The budget law introduces an extra 150% depreciation deduction (i.e. total tax depreciation of up to 250% of

the cost) for new assets acquired for the technological transformation of enterprises, under an initiative known

as the Industry 4.0 plan (relating to plant, equipment and machinery whose operations are digitally controlled

and/or operated by smart sensors and drives interconnected with a factory’s computer systems (the law

contains a list of qualifying assets)).

This measure is applicable to assets purchased from 1 January 2017 to 31 December 2017 (or 30 June 2018,

provided the relevant purchase order is made and at least 20% of the purchase price actually is paid by 31

December 2017).

R&D tax credit extended/increased

The R&D tax credit is extended through 31 December 2020 and is increased to 50% (previously, it was 25% or

50% depending on the type of cost) of the annual R&D incremental expenditure (of any type) exceeding the

average spending of fiscal years 2012, 2013 and 2014. The annual cap also will be increased to EUR 20 million

per year (from EUR 5 million).

As from 1 January 2017, the benefit also may apply to resident companies (and Italian permanent

establishments of non-resident companies) that carry out R&D activities through contracts with entities that are

resident for tax purposes in EU/European Economic Area (EEA) countries or in other countries and territories

that allow an adequate exchange of information with Italy.

Treatment of interest on certain medium or long-term loans clarified

In a ruling dated 29 September 2016, Italy’s tax authorities clarified that if interest qualifies for the domestic

withholding tax exemption for certain medium and long-term loans, the interest is not subject to tax in Italy as

financial income and the non-resident lender is not required to file an Italian tax return.

Background

Under Italian tax law, foreign companies with a permanent establishment (PE) in Italy are subject to Italian

taxation on the income realized through, and attributable to, the PE. Foreign companies without an Italian PE

are taxed on Italian-source income based on the specific rules provided for the category of income realized

(financial income, real estate income, etc.).

Financial income (such as interest) paid by an Italian company generally is subject to a specific withholding tax

regime, under which interest payments made by an Italian company to a foreign company are subject to a

domestic withholding tax of 26% (12.5% before 1 July 2014). However, an exemption or a reduction in the

withholding tax rate may apply under the EU interest and royalties directive or an applicable tax treaty.

Italy’s legislation was amended in 2014 to introduce a domestic withholding tax exemption that applies to

interest payments and other income arising from medium or long-term loans (generally, loans with a duration

longer than 18 months) granted to Italian companies by certain non-resident entities. The provision targeted

interest payments to the following recipients: (i) banks established in the EU; (ii) insurance companies

incorporated under the provisions of an EU member state; and (iii) certain non-leveraged collective investment

undertakings (OICRs) based in the EU (or a European Economic Area country included on Italy’s “white list”),

even if the OICR was transparent for tax purposes.

The domestic exemption provision was modified in January 2015, and again in February 2016. As a result of

the modifications:

The reference to non-leveraged OICRs has been replaced by a reference to foreign institutional investors

subject to regulatory supervision in their country of establishment, even if the investor is transparent for

tax purposes; and

Qualifying loans must be granted in accordance with the rules provided by the Italian banking law.

Ruling

The ruling was based on a request by an Austrian bank that granted a long-term loan to an Italian company as

to whether the interest payments from the Italian borrower that qualified for the withholding tax exemption still


21

would be taxable in Italy as financial income realized by a non-resident company without an Italian PE, and

whether an Italian tax return had to be filed to declare and pay tax on the income.

The tax authorities clarified that, if all the requirements necessary to qualify for the withholding tax exemption

are met, the interest income earned by the foreign lender is not taxable in Italy and, thus, no tax return has to

be filed; such interest is taxable only in the lender’s country of residence (in this case, Austria).

The tax authorities also clarified that, in line with the modifications to the exemption described above, the bank

granting the loan must meet certain requirements provided by the Italian banking law concerning the

authorization to carry out banking and financing activities with the public.

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LUXEMBOURG

VAT treatment of directors’ fees clarified

The Luxembourg VAT authorities published guidance on 30 September 2016 regarding the VAT treatment of

fees for director services, along with a comprehensive list of “frequently asked questions” (FAQ, available in

French on the tax authorities’ website). The circular, which will apply as from 1 January 2017, confirms that

director services constitute an economic activity that generally will make the director a taxable person for VAT

purposes.

Luxembourg VAT, at the standard rate of 17%, will be applicable to director services when the services are

considered to be carried out in Luxembourg by virtue of the place-of-supply rules. As a result, services

rendered by a Luxembourg director and services rendered by a non-Luxembourg director to a Luxembourg

company generally will be subject to VAT.

Independent Luxembourg directors will have to register for VAT purposes by 1 January 2017, at the latest, and

will have to file VAT returns to report their income from director fees. However, the VAT registration obligation

will not apply to an employee acting as a director for his/her employer; in such cases, the obligation to register

and file the VAT return will remain at the level of the employer.

Luxembourg companies that are considered taxable persons for VAT purposes and that receive services from a

non-Luxembourg director will have to self-assess the VAT on the director fees under the reverse-charge

mechanism. This could lead to a final cost of 17% of the taxable amount for companies that do not have the

right to deduct input VAT (e.g. banks, insurance companies), unless an exemption applies for the director

services.

In their FAQ, the VAT authorities remind taxpayers that the taxable amount for VAT purposes includes any

amount paid to directors for their services, including the withholding tax applicable to director fees. The circular

also reiterates the following:

Services carried out by directors serving in an honorary capacity (rather than in an active capacity) can

benefit from an exemption from the Luxembourg VAT law if the amounts received by the director qualify as

a reimbursement of costs; and

Directors may opt for the “small enterprises” regime available for taxable persons with an annual turnover

of less than EUR 25,000 per year. Under the regime, the turnover would be exempt from VAT and the

director would be subject to limited VAT obligations, while simplified VAT registration would remain

mandatory.

Although not mentioned in the circular, it is commonly understood that services carried out by directors of

investment funds and certain other entities qualifying to receive VAT-exempt management services may be

VAT-exempt when they qualify as “specific and essential” for the activity of the fund.

Tax reform 2017 in force

Law implementing the 2017 tax reform was published in the official gazette on 27 December 2016.

The main provisions for corporations are as follows:


22

A corporate income tax rate of 19% applies to a company whose taxable income exceeds 30,000 € (as

from 2018 it will be 18%). A rate of 15% applies if the taxable basis amounts up to 25,000 €. An

intermediate range applied when the taxable basis range between 25,000€ and 30,001€ ( 3,750€ + 39%

above 25,000€);The effective combined income tax rate is 27.08% in 2017 (26.01% in 2018), including

the corporate income tax (CIT), municipal business tax (MBT) and the contribution to the unemployment

fund, for companies located in Luxembourg City and with a taxable basis above 30,000 €;

Losses incurred up to the fiscal year that ended on 31 December 2016 may be carried forward indefinitely.

Losses incurred as from 2017 are restricted to a period of 17 years;

As from financial year 2016, the taxpayer can, under option in the tax returns, differ the deduction allowed

by the amortization. This optional mechanism will increase corporate taxation (CIT and MBT) and allow to

limit, under certain conditions, the net wealth tax due;

As from financial year 2016, the global investment tax credit amounts to 8% (instead of 7%) of the

acquisition value of the first 150,000 € of investments made during the year, and 2% of the excess over

150,000 €. The supplementary investment tax credit amounts to 13% (instead of 12%) of the acquisition

value of qualifying investments made during the tax year;

Certain undertakings (e.g. regulated credit institutions, regulated insurances and re-insurances and other

undertakings trading monetary and financial assets) benefit from a temporary tax relief on foreign

exchange gains derived from assets invested in the foreign currency of the share capital and representing

the equity capital of the undertaking. As from financial year 2016, the measure has been extended to all

companies which have their contributed capital in a foreign currency. This is subject to a written request;

As from 1st January 2017, the minimum net wealth tax, introduced in 2016 in replacement of the minimum

corporate tax, is increased from 3,210 € to 4,815 € for collective entities that have qualifying holding and

financing assets exceeding 90% of their balance sheet and 350,000 €.

To reinforce the coercive power of the tax authorities, various modifications are entered into force including

an increase of the amounts of penalties

Country by Country reporting in force

The Luxembourg law implementing CbC reporting, in line with BEPS action 13, was published in the official

gazette on 27 December 2016 and requires the first CbC reports to be filed for the 2016 fiscal year. The

Luxembourg tax authorities confirmed that the deadline for filing CbC reporting notifications for fiscal year 2016

is extended until 31 March 2017; accordingly, no penalty for late notifications will apply up to this date.

In addition to the CbC law, the Luxembourg tax authorities also published guidelines and FAQs, which should

be updated regularly, on their website to clarify the procedures for the application of the law.

The CbC law includes a provision requiring any Luxembourg tax resident subsidiary or Luxembourg branch of a

group that will file a CbC report in 2017 to file a notification with the tax authorities before the end of 2016 (if

the multinational group’s fiscal year end is 31 December) to identify the group’s reporting entity that will file

the report. In theory, the failure to file a notification—or even filing a late notification—could result in penalties

of up to EUR 250,000 per Luxembourg “constituent entity.” However, the tax authorities’ announcement

confirms that no such penalties will be imposed for entities that file their notifications by 31 March 2017.

New TP Guidance: to promote Luxembourg as a financial centre introduced

Luxembourg’s 2017 budget law, published on 27 December 2016 in the official gazette, includes a new set of

rules for transfer pricing practices, in the form of a new article (article 56bis) of the Luxembourg Income Tax

Law (“LITL”).

A new circular from the Luxembourg Tax authorities complements article 56bis LITL by including new guidance

and clarifications on the transfer pricing regulations, based on the OECD transfer pricing guidelines, for

Luxembourg entities engaged in intra-group financing activities. The circular applies to all intra-group financing

activities as from 1 January 2017 and replaces the previous guidance (Circulars No. 164/2 dated 28 January

2011 and No. 164/2bis dated 8 April 2011) as from that date.

Key elements of the circular are highlighted below:

Requirements relating to equity at risk

Based on the circular, the previously required minimum amount of equity in the case of a group financing

company (i.e. at least 1% of the nominal amount of the loan(s) granted or EUR 2 million) is no longer


23

mandatory. Therefore, it is necessary to evaluate transactions on the basis of the facts and circumstances

specific to each individual case.

When the comparability analysis shows that the profile of a group financing company is comparable to one of

the types of entities subject to the EU regulation on prudential requirements for credit institutions and

investment firms, such company is considered to have sufficient equity for transfer pricing purposes if its equity

complies with the solvency requirements detailed in the regulation. Otherwise, when the functional profile

deviates from the profile of a credit institution, the level of equity may be assessed based on generally applied

credit analysis methods.

Margin for financing activities

The circular does not require a minimum return for financing activities; therefore, for the purposes of

determining an appropriate margin, the conditions of the “controlled transaction” should be comparable to

those of a “transaction between third parties.” It is necessary to identify comparable transactions through

transparent and systematic processes.

If a taxpayer engaged in group financing activities as a financial intermediary does not intend to prepare

transfer pricing documentation (e.g. in the case of limited group financing activities), it may choose in its

annual tax return to benchmark its remuneration based on a return on assets (2% after tax).

Organizational substance requirements

Similar to the previous circulars, a company engaged in group financing transactions must have certain

operational substance in Luxembourg to support that the strategic/key business decisions effectively have been

made in Luxembourg, e.g. a majority of board members are Luxembourg residents.

Validity of existing APAs

Any APA issued before the introduction of the new article 56bis and based on the previous rules no longer will

be binding for the Luxembourg tax authorities as from 1 January 2017, for any tax year subsequent to 2016.

Taxpayers can continue to request new APAs going forward, based on the updated requirements of the new

circular.

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NETHERLANDS

Country by Country reporting notification extended

The Dutch Ministry of Finance has published a Decree in which the Dutch State Secretary of Finance announced

that he is postponing the deadline for the CbC reporting notification.

Dutch CbC reporting regulations require all Dutch entities that fall under the scope of CbC reporting to

proactively disclose to the Dutch Tax Authorities the details of the Dutch or foreign group entity that will file the

CbC-report on behalf of their group. In principle, this CbC reporting notification needs to be done before the

end of the fiscal year to which the CbC-report pertains. For FY2016 however, it has now been decided to

postpone the CbC reporting notification deadline from December 31, 2016 (or the end of the fiscal year) to

August 31, 2017.

Bill to amend Dutch fiscal unity regime is published

On 8 December 2016, a bill to amend the fiscal unity regime was published. The bill had been adopted by the

lower house of the parliament on 28 September 2016 and by the upper house on 29 November 2016.

Background

On 16 October 2015, the State Secretary for Finance sent a set of documents concerning the bill to amend the

fiscal unity regime (Wet aanpassing fiscale eenheid) (the Bill) to the lower house of the parliament. The

documents contained the proposed amending legislation and explanatory memorandum to the legislation.


24

On 12 June 2014, the Court of Justice of the European Union had decided, in SCA Group Holding (Case C-

39/13) that the Dutch fiscal unity regime was incompatible with European law, as it did not allow a fiscal unity

between (i) a resident parent company and a resident sub-subsidiary (where the shares in the latter are held

by non-resident intermediary companies); and (ii) resident "sister companies" (that share a common, non-

resident, parent company). The State Secretary issued Decree No. BLKB2014/2137M on 30 December 2014

which permitted these two types of fiscal unity to be formed.

The Bill will incorporate the Decree into the Corporate Income Tax Act 1969 (Wet op de vennootschapsbelasting

1969), also addressing the (further) inclusion of permanent establishments of non-resident companies into a

Dutch fiscal unity. The main points of the Bill are the following:

a non-resident parent company must be a naamloze vennootschap (public company), besloten

vennootschap (limited liability company), coöperatie (cooperative), onderlinge waarborgmaatschappij

(mutual insurance association) or a comparable foreign entity;

a non-resident intermediary company must be a naamloze vennootschap (public company), besloten

vennootschap (limited liability company) or a comparable foreign entity;

the holding requirement for the parent and intermediary companies will be amended so that 95% of the full

legal and economic ownership of the shares is required (currently 95% of the legal and economic ownership

is sufficient);

the parent and intermediary companies must be (i) resident in the European Economic Area (EEA); and (ii)

subject to a tax on profits; and

fiscal unities will, inter alia, be possible between (i) a Dutch subsidiary of a non-resident (parent) company

and a permanent establishment of that non-resident (parent) company whereby the shares in the former

are not attributable to the latter; (ii) a Dutch permanent establishment of a non-resident company and a

Dutch (sub-)subsidiary of another non-resident company that share the same non-resident parent

company; and (iii) a Dutch permanent establishment of two non-resident companies that share a common,

non-resident, parent company.

Bill on implementation of Directive on automatic exchange of information with respect to advance

tax rulings is published

On 29 December 2016, a bill on the implementation of the Directive on automatic exchange of information with

respect to advance tax rulings (the Bill) was published.

Background

On 1 September 2016, a bill on the implementation of the Directive on automatic exchange of information with

respect to advance tax rulings (Directive 2015/2376/EU) of 8 December 2015, amending the Mutual Assistance

Directive [on administrative cooperation in the field of taxation] (2011/16) (the Directive) was submitted to the

parliament.

Exchange of information

Information on rulings will be exchanged with other EU Member States from 1 January 2017. However, with

respect to the following rulings issued before 1 January 2017, information will be exchanged retroactively from

1 January 2012 with regard to the following:

advance cross-border rulings and advance pricing agreements issued, amended or renewed between 1

January 2012 and 31 December 2013, provided they were still valid on 1 January 2014; and

advance cross-border rulings and advance pricing agreements issued, amended or renewed between 1

January 2014 and 31 December 2016, irrespective of whether they are currently still valid.

Information that will not be exchanged

The Netherlands has used the option provided for in the Directive to exclude from the information exchange

those advance tax rulings and pricing arrangements that were issued to companies with annual net turnover of

below EUR 40 million at group level, if such advance cross-border rulings and advance pricing agreements were

issued, amended or renewed before 1 April 2016.

However, this exemption does not apply to companies mainly involved in financial or investment activities.


25

BACK TO TOP

SPAIN

Spain amends system for advance CIT payments

Companies whose turnover exceeds €10 million are subject to new requirements for advance payments of

corporate income tax (CIT) for fiscal years beginning on or after 1 January 2016, including a minimum

payment. The new rules apply to prepayments from October 2016.

Legislation (Royal Decree Law 2/2016) published in Spain’s official gazette on 30 September 2016 introduces

tax measures aimed at reducing the public deficit; in particular, changes to the requirement for certain

companies to make advance payments of corporate income tax.

The new rules, which are applicable only to companies whose turnover exceeds EUR 10 million during the

previous 12-month period, include (i) an increased rate to calculate the advance payment of corporate income

tax; and (ii) a minimum advance payment to be calculated on the basis of a different formula.

The rules are effective for fiscal years beginning on or after 1 January 2016 and apply to prepayments due in

October 2016 and thereafter.

Increased rates applicable to advance payments

The rate for companies with turnover exceeding EUR 10 million during the previous 12-month period that make

advance payments based on net taxable income are increased from 5/7 of the applicable tax rate to 19/20, so

that the applicable general rate to calculate the advance payment is increased from 17% to 24%.

Minimum advance payment

Under the amended rules, companies with turnover exceeding EUR 10 million during the previous 12-month

period are required to calculate a minimum advance payment calculated on the basis of their positive

accounting result. In particular, they will have to pay 23% of the positive accounting result recorded in the

company’s income statement (profit and loss statement) for the period covering the relevant advance payment

(i.e. the first three, nine or 11 months of the current taxable year), if this amount is greater than that resulting

from the general formula based on the net taxable income described above.

For these purposes, the only deduction allowed from the accounting result will be for prior advance payments

for the same fiscal year. The relevant rate applicable on the accounting result will be 25% (instead of 23%) for

financial entities and certain companies engaged in the exploration and exploitation of hydrocarbons that are

taxed at the increased corporate income tax rate of 30%.

In computing the amount of the advance payment based on the positive accounting result, any income derived

from debt waivers arising from a creditors’ agreement must be excluded from the positive accounting result,

unless this income is included—in whole or in part— in the taxable income for the period based on specific

rules. Similarly, income derived from the conversion of a debt into share capital that is not included in taxable

income must be excluded from the positive accounting result.

This minimum advance payment requirement does not apply to Spanish real estate investment trusts, and

special rules or exclusions may apply for certain entities (e.g. partially exempt entities, entities that receive

credits for rendering public services or entities that are taxed at special reduced rates).

Comments

The new measures, which are intended to be permanent, are aimed at reducing the public deficit to bring it in

line with EU objectives (the government estimates that it should be able to collect additional payments of

approximately EUR 8,300 million in 2016). However, the government has informally stated that new advance

payment rules could be abolished in the future once the public deficit falls below 3%.


26

Spain introduces measures to raise corporate tax revenue

A tax package approved by Spain’s Council of Ministers on 2 December 2016 and published in the official

gazette on 3 December 2016 aims to achieve deficit reduction goals by raising tax revenue through measures

to increase the corporate income tax liability of taxpayers operating in Spain (e.g. by limiting the use of losses

and tax credits and eliminating certain deductions); some of the measures apply retroactively for fiscal years

beginning on or after 1 January 2016.

In addition, as indicated in the press conference following the Council of Ministers meeting, the council will send

a draft bill to parliament with other tax measures (including a measure on environmental taxation). The royal

decree on VAT and the draft bill have not yet been published, so there is limited information available on their

content.

Main tax measures in deficit reduction package

Some of the corporate income tax measures in the deficit reduction package apply to fiscal years (FYs)

beginning on or after 1 January 2016 and others apply to FYs beginning on or after 1 January 2017. The

following rules apply to FYs beginning on or after 1 January 2016:

Equity impairments that previously were deductible must be reversed in an accelerated manner. In 2013,

equity impairments became non-deductible and rules were introduced to determine under what

circumstances equity impairments that previously had been deductible had to be reversed (due to a

recovery of value), generating taxable income. A special additional rule now has been introduced so that,

regardless of whether there is a recovery of value, any equity impairments that had been deductible in tax

years before 2013 and that have not yet been reversed must be ratably reversed over a five-year period

starting as from the FY beginning in 2016.

The offset of tax loss carry forwards against taxable income for large enterprises is limited as follows:

o For corporate income tax payers whose net turnover (in the 12-month period before the beginning of

the current FY) is EUR 60 million or more, the offset is capped at 25% of the net taxable income

(previously, the offset generally was capped at 60%).

o For corporate income tax payers whose net turnover (in the 12-month period prior to the beginning of

the current FY) is between EUR 20 and EUR 60 million, the offset is capped at 50% of the net taxable

income.

o For taxpayers with net turnover below EUR 20 million (in the 12-month period prior to the beginning of

the current FY), the offset continues to be capped at 60% of the net taxable income (to be increased to

70% as from 2017).

The use of double tax credits (foreign or domestic) by corporate income tax payers whose net turnover (in

the 12- month period before the beginning of the current FY) is EUR 20 million or more will be limited to

50% of their tax liability.

For FYs beginning on or after 1 January 2017, the main change is that losses arising upon the transfer of

participations qualifying for the Spanish participation exemption regime or corresponding to companies resident

in tax havens or low-tax jurisdictions no longer will be deductible, nor will losses arising upon the transfer of a

permanent establishment held abroad by a Spanish corporate income tax payer.

Other measures

The abolition of the wealth tax has been postponed to 2018, so the tax will continue to be levied in 2017.

With effect as from 1 January 2017, taxpayers no longer may request to pay tax liabilities relating to

withholding and chargeable taxes (e.g. VAT) and advance payments of corporate income tax (among other

items) by instalments, nor may they request to postpone the payment of these liabilities.

New VAT reporting requirements introduced

On 2 December 2016, Spain’s council of ministers approved a royal decree that introduces a new system (SII),

under which taxpayers will be required to upload information about their VAT invoices to the tax authorities’

website. The key aim of the SII is to prevent VAT fraud and improve tax controls by the authorities. The SII will

become effective on 1 July 2017. However, taxpayers subject to the SII also will be required to submit invoices

relating to the first six months of 2017 (up to 30 June), although the deadline to submit this data will be

extended to 1 January 2018.


27

Overview of SII

The SII will be mandatory for all taxpayers that are registered in the monthly VAT refund register, are part of a

VAT group or whose transactions in the previous year exceeded EUR 6,010,121.04. Other taxpayers may opt to

use the system.

Affected taxpayers will have to upload to the online platform of the Spanish tax authorities all billing documents

that form part of the VAT registry books (issued and received invoices, and details of certain intra-community

transactions). New information, such as brief descriptions of transactions, the type of invoice, etc., also will

need to be filed.

The data will need to be uploaded effectively on a real-time basis. Taxpayers generally will be required to

submit data within four business days from the date an invoice is issued/received (extended to eight days as a

temporary measure for the period from 1 July 2017 to 31 December 2017).

Companies that are required to apply the SII (as well as those that elect to use the system) will be required to

file their VAT returns on a monthly basis by the 30th day of the month following the reporting period

(extending the deadline for filing the return by an additional 10 days).

Electronic VAT reporting system

SII will require recordings in the VAT registry books to be submitted via the tax administration’s online platform

on a near real-time basis.

This new system, which will apply as from 1 July 2017, requires that the data corresponding to those

transactions that must be recorded in the VAT registries (i.e. the registries for issued and received invoices, the

investment assets registry and the registry for certain intracommunity transactions) must be electronically

submitted to the tax administration within a four-day period (however, an extended eight-day period may

apply until 31 December 2017 under a transition rule).

VAT taxpayers that have to file monthly returns will be required to adopt the SII, including taxpayers that have

signed-up for the monthly VAT refund registry (REDEME), large enterprises (those with annual turnover over

EUR 6 million) and VAT groups. Other taxpayers may elect to use the SII.

Comments

In general terms, the content requirements of the billing registries will be increased for taxpayers using the SII

system, and the SII overall will result in a significant change in the management of VAT. Further, because the

taxpayer’s information will have to be submitted on a near real-time basis, taxpayers will need to take

particular care to ensure that relevant transactions have been properly treated from a VAT perspective. The tax

authorities will “match” the information provided by suppliers and customers, and if there are any

discrepancies, the authorities may initiate further investigation or open an audit, etc. Significantly, the

information collected for VAT purposes will be shared with the tax authorities responsible for corporate income

tax and transfer pricing.

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UNITED KINGDOM

UK Autumn Statement 2016

The new government’s first Autumn Statement reiterated the message that Britain is ‘open for business’, with

announcements targeted at supporting business confidence in the robustness of the UK economy and the tax

system. Detailed coverage and comment on the Autumn Statement is available from www.ukbudget.com

Corporation tax rate

The Chancellor restated the government’s commitment to the UK having the lowest corporation tax rate in the

G20. As a result he confirmed that the UK’s current rate of 20% will decrease as expected, to 19% in April



28

2017 and 17% in April 2020. These reductions were contained in Finance Act 2016 and have therefore already

been enacted.

Depending on the activities that are being carried out in the UK, for Japanese headed groups, a reduction in the

UK corporation tax rate gives rise to a possible concern under the Japanese anti-tax haven rules (‘JCFC’). The

Japanese government are considering reforms to the JCFC rules as part of the 2017 Tax Reform Proposals and

therefore, it would be important for Japanese groups to monitor these changes along with the corporation tax

rate reductions in the UK.

Hybrid mismatches

The hybrid mismatch rules were enacted in Finance Act 2016 and come into force on January 1, 2017. Detailed

guidance were released on December 5, 2016 setting out how the rules will work in practice.

In the meantime the Chancellor announced that certain minor technical modifications will be made to the rules

in relation to financial sector timing claims and the rules concerning deductions for amortisation. These changes

have been released in draft form on December 5, 2016 and will be included in Finance Bill 2017. They will have

effect from January 1, 2017.

Research & Development (‘R&D’) and patent box

The government announced a £23bn investment in a National Infrastructure and Innovation Fund, including a

substantial increase in support for R&D. The government also announced that it will be looking at ways to

enhance the existing R&D tax credit regime to make the UK an even more attractive location for carrying out

R&D activity.

In addition Finance Bill 2017 will include additional provisions in respect of the Patent Box regime, under which

income from patented technology is taxed at a 10% rate. The provisions will cover how the regime will apply to

companies within a cost sharing arrangement, with the intention that companies are neither advantaged nor

disadvantaged. These particular changes will only come into effect for accounting periods commencing on or

after April 1, 2017.

Taxation of non-residents with UK income

The government announced a consultation into the way in which foreign companies are taxed on their UK

income. Currently companies without a trading business in the UK are subject to income tax on their UK

earnings, rather than corporation tax. This includes foreign companies that generate income from UK rental

property, interest and royalties, and the consultation will consider whether corporation tax should apply going

forward.

This consultation will also consider whether the UK’s new rules on interest deductibility and loss relief will apply

in this context. Certain other questions will need to be addressed as part of this consultation, including whether

the current 20% rate of tax on this income will reduce to 17% in the future, in line with the corporation tax

rate reduction.

Northern Ireland Corporation Tax (‘NICT’)

The government previously announced that the power to levy corporation tax in Northern Ireland is being

devolved to the Northern Ireland Assembly, with the expectation that a 12.5% rate of NICT will be introduced

from April 2018. The Chancellor announced that measures will be included in Finance Bill 2017 to enable all

small and medium sized businesses trading in Northern Ireland to benefit from this rate. Certain other changes

will be introduced to prevent abuse of the regime.

Changes to the timing of the UK’s fiscal announcements

The UK’s fiscal year runs from 1 April to 31 March and the UK’s fiscal calendar has typically included a Budget

in March and an Autumn Statement in November. The Chancellor announced that the March 2017 Budget will

happen as normal and the UK will then move to having a single, annual fiscal event from Autumn 2017.


29

A Spring Statement will then be introduced, with the aim of simply commenting on the UK’s fiscal position,

subject to the government reserving its right to make tax changes should the economic climate require it.

The move to a single, annual fiscal event is welcome as businesses will only need to digest and respond to

changes in UK tax laws once a year. It should also allow more time for scrutiny of legislation by Parliament,

companies and the tax profession, which should lead to less uncertainty and better quality legislation.

UK corporation tax reform consultation responses and draft legislation

On 5 December 2016, following consultations, the UK government issued consultation responses and draft

legislation in three key areas of corporate taxation:

Tax deductibility of corporate interest expense – new rules restricting the corporate deductibility of interest

expense apply from 1 April 2017. Broadly, all groups will be able to deduct £2 million of net interest

expense. Amounts over this will be restricted to the lower of 30% of tax-based earnings before interest and

tax depreciation (called tax-EBITDA), and the worldwide group’s net interest expense. If worldwide net

interest expense is higher than the fixed ratio, the group may elect to deduct an amount based on the

group’s net accounting interest to accounting EBITDA ratio, again restricted to the worldwide group’s net

interest expense.

Corporation tax loss relief reform – key changes are greater flexibility in the use of brought-forward losses

against companies’ profits and restrictions on the amount of profits against which those losses can be set.

For profits from 1 April 2017, only 50% of profits will be able to be relieved by brought forward losses

subject to a group-wide annual deminimis of £5 million.

Substantial shareholding exemption (‘SSE’) – changes to reduce the administrative burden and complexity

of eligibility for the exemption, which broadly exempts from tax in the UK gains on the disposal of 10% or

more shareholdings.

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30

JBTE CONTACTS

JBTE is a co-ordinated network of business tax specialists at Deloitte offices in Europe dedicated to serving

Japanese multinational corporations operating in Europe.

Belgium

Wim Eynatten +32 2 600 6759 [email protected]

Teru Arima +32 2 600 6757 [email protected]

Germany

Thomas Welz +49 211 8772 3522 [email protected]

Mitsutoshi Sato +49 211 8772 2099 [email protected]

Netherlands

Roger Brands +31 88 288 1097 [email protected]

Taik Fuchten +31 88 288 1272 [email protected]

Kazuki Fujio +31 88 288 4315 [email protected]

United Kingdom

Mohan Manuel +44 20 7007 1838 [email protected]

Yuki Konii +44 20 7303 2828 [email protected]

Hiro Hidaka +44 20 7007 6589 [email protected]

Japan

Shinya Matsumiya +81 80 4183 3077 [email protected]

Hiroyuki Hayashi +81 3 6213 3909 [email protected]

Kazumasa Yuki +81 3 6213 3981 [email protected]

If you prefer to no longer receive these mailings or another person in your organisation would like to receive

any of our publications, please send an e-mail with the appropriate contact information to

[email protected].

JBT Europe’s network covers all countries across the European region. This material has been prepared by

professionals in the member firms of Deloitte Touche Tohmatsu. It is intended as a general guide only, and its

application to specific situations will depend on the particular circumstances involved. Accordingly, we

recommend that readers seek appropriate professional advice regarding any particular issues that they

encounter. This information should not be relied upon as a substitute for such advice. While all reasonable

attempts have been made to ensure that the information contained herein is accurate, Deloitte Touche

Tohmatsu accepts no responsibility for any errors or omissions it may contain whether caused by negligence or

otherwise, or for any losses, however caused, sustained by any person that relies upon it.

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© 2016 Deloitte LLP. All rights reserved.

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number OC303675 and its registered office at 2 New Street Square, London EC4A 3BZ, United

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Japanese Business Taxation Europe Newsletter · 2020-05-10 · Japanese Business Taxation Europe Newsletter Newsletter for Japanese Multinational Corporations operating in Europe

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