INTERNATIONAL TAX UPDATE - JULY 23.

 §  The Australian Taxation Office (ATO) publishes the updated guide to taxation of financial arrangements (TOFA). TOFA aims to reduce the influence of tax considerations on how financial arrangements are structured. TOFA also aims to closer align the taxation recognition of gains and losses on financial arrangements with commercial recognition of gains and losses.Although Tob FA provides a comprehensive and overarching framework to address the economic substance of arrangements, it is not an exclusive code for the taxation of gains and losses from financial arrangements. Unless otherwise specified, other provisions of the Income Tax Assessment Act 1936 (ITAA 1936) or the ITAA 1997 still deal with gains or losses from financial arrangements where TOFA does not. 

 

§  Switzerland will be implementing the global minimum tax. It expects the Income Inclusion Rule (IIR) and Qualified Domestic Minimum Top-up Tax (QDMTT) to be applicable as per 1 January 2024. 

 

§  The Brazilian lower house of Congress approves the Tax Reform Bill which would replace the current framework of consumption taxes with just two value-added taxes, one federal and the other local. Taxpayers would shift to the new rates during a transitory period between 2026 and 2032. The standard VAT rate is expected to be about 25 percent. 

 

§  Dutch Court handed down its judgement siding with Tax Administration in its determination that effective management of a company was exercised in Netherlands. In brief, the case involved a Dutch incorporated company but tax migrated to Malta appointing a Maltese tax resident Director. The Convention’s tie breaker rule -place of effective management- for settling the residency, was at the core of the dispute. Relevant indicia, leading to the plausible inference that the effective management exercised in Netherlands, inter alia included (i) Dutch advisers continued having key role post relocation, (ii) Maltese management was completely indemnified over routine Director’s liability, (iii) constraining the Maltese Director’s power, (iv) emails from Dutch advisors showing that Board’s decision were planned by them, (v) time records of the Directors show minimum time and low remuneration  

 

§  UAE Corporate tax consultation - Important news for the free zones. The Ministry of Finance has issued a public consultation on the free zone relief, inviting feedback on a number of issues including the framework for Qualifying Activities and Excluded Activities.  It’s a very informative document, which provides detailed proposals for the definition of each of the activities. Responses must be made by 2 August 2023. The consultation can be accessed from the MOF website: Free Zone Public Consultation – Ministry of Finance – United Arab Emirates  

 

§  The parliament of Bangladesh has repealed the Income Tax Ordinance,1984 and enacted new Income Tax Act, 2023 effective from 22 June 2023