BDO Corporate Tax News

• Australia: The tax authorities have released a draft ruling for consultation on the characterisation of payments for software and intellectual property rights as royalties. The consultation runs until 1 March 2024.
• Austria: The corporate income tax rate dropped from 24% to 23% on 1 January 2024 as announced in a 2022 law.
• Barbados: The tax authorities issued a policy note on 12 January 2024 that sets out the monthly prepayments of corporate tax due in 2024. Monthly prepayments of corporate income tax will be due by any company that is part of a multinational entity group with annual revenue of EUR 750 million or more in its consolidated financial statements in at least two of the last four fiscal years and whose ultimate parent entity or intermediary parent is located in a jurisdiction that has implemented legislation in accordance with the Pillar Two GloBE rules. The prepayment will be 9% of taxable income. Penalties will apply for noncompliance.
• Belarus: As from 1 January 2024, a new 25% corporate income tax rate applies to taxable income exceeding BYN 25 million for the reporting period. The standard 20% rate applies to taxable income below that amount.
• Cayman Islands: The island is removed from the EU’s list of jurisdictions with deficiencies in their regimes against money laundering and countering the financing of terrorism as from 7 February, according to an announcement by the government on 19 January.
• Chile: The government has proposed the introduction of a beneficial owner registry that would house detailed information on the ultimate beneficial owners of legal entities, investment funds, etc. that hold an interest of 10% or more of the capital or voting rights of the entity/fund. The registry would be administered by the Chilean tax authorities and affected parties would be required to submit the relevant beneficial owner information within a specific time period. Penalties would apply for noncompliance.
• Dominican Republic: Guidance released by the tax authorities addresses the income tax treatment of gains derived from the disposal of cryptocurrency. According to the ruling released on 10 October 2023, when the results of a crypto transaction enter the banking system, the funds are considered taxable income for income tax purposes.
• European Union: The European Commission initiated infringement proceedings on 24 January 2024 against three member states—Cyprus, Ireland and Romania—for failing to transpose the payment service providers (PSP) directive into domestic law. The PSP directive, which applies as from 1 January 2024, requires EU-established PSPs (e.g., banks, credit card providers) to keep records of the payments they process and their beneficiaries for three calendar years and share the data with the local tax authorities, who will then share the data with the tax authorities in other EU member states. The data will be stored in a central database. The three countries have two months to respond to the Commission’s letter, after which the Commission may send a reasoned opinion formally requesting compliance. Continuing noncompliance could result in a referral to the Court of Justice of the European Union and potential penalties. The plenary of the European Parliament adopted its opinion on the proposed DEBRA directive on 16 January 2024 (for prior coverage, see the article in the May 2022 issue of Corporate Tax News). The opinion recommends certain changes to the proposal, even though negotiations on the DEBRA directive at the level of the European Council have been suspended since December 2022.
• Germany: The Secondary Credit Market Promotion Act, passed by the federal parliament on 14 December 2023, includes changes to the limitation on the deduction of interest expense to adapt domestic rules to the EU Anti-Tax Avoidance Directive (for prior coverage, see the article in the July 2023 issue of Corporate Tax News). For financial years beginning on or after 14 December 2023 and not ending before 1 January 2024, the stand-alone clause can be used only if the taxpayer is not a related party within the meaning of the Foreign Tax Act and does not have a permanent establishment outside the state in which it has its residence, habitual abode, registered office or management. Additionally, the scope of application of the equity escape clause is revised and the legislation clarifies that an EBITDA carry forward does not arise in financial years in which the interest expense does not exceed the interest income.
• Hong Kong: Changes to the foreign-source income exemption (FSIE) regime were passed by the Legislative Council on 29 November 2023 and apply as from 1 January 2024. The scope of assets under the regime is expanded to include assets other than shares or equity interests (for prior coverage, see the article in the August 2022 issue of Corporate Tax News). The government issued a press release in conjunction with the passage of the new rules in which it clarifies that gains from the disposal of foreign-source non-intellectual property will continue to be exempt from tax if the multinational enterprise entity has adequate economic substance in Hong Kong. The extent of the exemption for gains from the disposal of foreign-source intellectual property will be determined by the OECD nexus approach.
• India: The Central Board of Direct Taxes issued a notification on 19 December 2023 that revises the safe harbour rules for intragroup financing arrangements in cross-border transactions. The amended rules become effective as from 1 April 2024. For an analysis of the rules, see the tax alert drafted by BDO in India.
• Japan: The 2024 tax reform bill submitted to parliament on 2 February 2024 includes an innovation box regime, changes to the R&D credit rules and the introduction of tax credit incentives and the introduction of rules that would require platform operators to remit Japanese consumption tax. on behalf of foreign digital services businesses (for prior coverage, see the article in the January 2024 issue of Indirect Tax News).
• Korea (ROK): A presidential decree was enacted in January 2024 to add a new chapter to the Enforcement Decree of the Law for the Coordination of International Tax Affairs, which contains details on the Korean GloBE rules (for prior coverage, see the article in the August 2023 issue of Corporate Tax News).
• Kuwait: The Ministry of Commerce and Industry has issued a resolution requiring entities in Kuwait (unless specifically exempt) to identify and report their ultimate beneficial owner. The resolution, which applies as from 1 April 2024, will require entities within its scope to collect and maintain certain information about their beneficial owners, shareholders and nominee directors. The information will have to be reported within 60 days of the effective date of the resolution. Kuwait joined the OECD/G20 Inclusive Framework on 15 November 2023.
• Malaysia: In a public ruling released on 24 January 2024, the Inland Revenue clarifies how the investment tax allowance that can be applied for by a company that participates or intends to participate in a business in the manufacturing sector with respect to production of a listed promoted product, reinvestment in specific industries, and high-tech companies and small-scale companies.
• Malta: In a notice issued on 28 December 2023, the Commissioner for Tax and Customs announced that any capital expenditure incurred on intellectual property (IP) or IP rights may be deducted in full in the year in which the expenditure was incurred or in the year in which the IP or IP rights are first used in producing taxable income. The deduction applies as from the 2024 year of assessment. The notice also states that relevant capital expenditure incurred before the period covered by year of assessment 2024 may be claimed in full in year of assessment 2024.
• OECD: The Forum on Harmful Tax Practices released it annual report on low tax regimes on 6 February 2024. Notably, Hong Kong and the United Arab Emirates have been deemed to be not harmful.
• Oman: The withholding tax on dividends and interest has been suspended as from 29 December 2022 and will remain suspended until further notice.
• Saudi Arabia: The tax authorities have extended the amnesty under which tax fines and financial penalties can be avoided if taxpayers regularise their compliance. The amnesty runs through 30 June 2024.
• Singapore: The Inland Revenue Authority of Singapore (IRAS) updated its guidance on the determination of corporate residence in November 2023 to address the situation where technology is used to allow virtual participation in board of directors meetings. The location of company board meetings where strategic decisions are made usually determines where management and control is exercised for corporate residence purposes. According to the updated guidance, a board meeting that involves the use of virtual meeting technology will generally be regarded as having strategic decisions made in Singapore if at least 50% of the directors (with authority to make strategic decisions) are physically present in Singapore during the meetings or the Chairman of the Board of Directors (if the company has such an appointment) is physically present in Singapore during the meeting. 
• Spain: The constitutional court ruled on 18 January 2024 that several corporate tax measures introduced in a 2016 Royal Decree are unconstitutional, including rules on impairment losses on certain holdings, restrictions on the offsetting of negative tax bases and a limit on deductions to avoid double taxation.
• United States: As part of U.S. efforts to prevent concealment of assets through shell companies or similar structures, the Corporate Transparency Act and accompanying regulations require beneficial ownership information reporting by certain entities. Effective 1 January 2024, many companies are required to report information electronically regarding their beneficial owners to the Financial Crimes Enforcement Network of the U.S. Treasury Department (FinCEN) through a secure filing system on FinCEN’s website. For companies created or registered before 1 January 2024, reporting is required by 1 January 2025 and for companies created or registered on or after 1 January 2024 and before 1 January 2025, reporting is required within 90 calendar days of the earlier of receiving actual or public notice that the company’s creation/registration is effective. Updates to reporting will be required, and entities and individuals may be subject to civil or criminal penalties for failure to comply.