International Tax Update

 

• Apex court of Newzeland held that Interest on related party debt liable to be disallowed under GAAR even if funding arrangement complies with Thin Cap &Transfer Pricing.  Revenue justified in invoking GAAR to disallow deduction to interest payments on convertible note where the interest payments were in substance repayments of principal, even though the funding arrangement fell within the ambit of interest deductibility provisions and also complied with applicable Special Anti-Avoidance Rules (SAARs) of Thin Capitalisation Rules(debt equity ratio limit) and Transfer Pricing (arm's length interest rate). 
• UAE announced the small business relief for businesses earning revenue less than AED 3 million. A reduced corporate tax rate will be applicable on such businesses.  The Small Business Relief will not be available to Qualifying Free Zone Persons or members of Multinational Enterprises Groups (MNE Groups) as defined in Cabinet Decision No. 44 of 2020.  

 

Further, UAE ministry of Finance provides for exceptions from               registration requirements for government entities, government-controlled entities, as well as extractive businesses and non-extractive natural resource businesses that meet the necessary conditions under the Corporate Tax Law. The important exemption is for Non-Resident earning UAE sourced income and not having a PE in UAE. This would mean that Non-Residents would be paying tax in UAE only if they have a PE in UAE. It would also mean that in future once the withholding tax rates move up from 0%, that may become the final liability for the Non-Residents.

• The German government is taking significant steps towards fostering innovation and growth by introducing the "Future Finance Act".
  This act aims to create a more supportive environment for startups and investors by issuing electronic securities on a blockchain and making crypto assets more portable. These new rules would apply to businesses with less than 500 employees and with revenues below 100 million euros, and would also reduce the minimum market capital for IPOs to 1 million euros.
  This forward-thinking approach by the German government is a positive step towards embracing technology and innovation to improve the country's financial infrastructure and promote economic growth. 
• Ireland has now introduced a qualified domestic minimum top up tax of  tax @ 2.5%, which would be applicable to large corporates with a turnover of at least €750m. This would be applicable from January 2024. 
• Advantage granted by a French company to its subsidiary in Canada by way of interest-free advances would constitute a distribution of profits if no commercial or financial compensation were received: Holds CAA de Paris (Decision of 15 March 2023).  

Saudi Arabia approves amendments to the Transfer Pricing bylaws to include Zakat payers as part of covered entities