Bahamas: A policy White Paper released on 20 April 2022 outlines the government’s policy on digital assets up to 2026. As part of the policy, Bahamian citizens will be permitted to pay tax using digital assets, such as the Bahamian “sand dollar” (a digital version of the Bahamian dollar). A digital advisory panel will be established to review developments in the sector, as well as a digital asset policy committee. In a separate development, the Bahamian Inland Revenue has announced it has gone cashless and will no longer accept cash payments for VAT, property tax and stamp duty; all payments must be made via debit or credit card or cheque.
Brazil: A provisional measure published on 28 April 2022 temporarily increases the social contribution on net profits rate by one percentage point for banks, insurance companies and other financial institutions. The CSLL is a mandatory contribution on corporations that is used to finance the Brazilian social security system. The increased CSLL rates, which will apply between 1 August 2022 and 31 December 2022, are 21% for banks and 16% for insurance companies, exchange and securities brokers, credit, financing and investment companies, real estate credit companies, leasing companies, card administrators and credit cooperatives.
Canada: The Department of Finance on 29 April 2022 released draft legislative proposals that would address hybrid mismatch arrangements, as committed to in Budget 2021 (see also the article on Canada’s 2022 budget in this issue). The proposals are intended to be generally in line with the recommendations in the report on action 2 of the OECD/G20 BEPS project, with adaptions for Canadian income tax purposes.
European Union: Finance Ministers of the 27 EU member states held a meeting on 5 April 2022 to discuss the revised compromise text of the proposed EU directive that would set out the rules to incorporate Pillar Two of the OECD/G20 initiative into EU law. The directive would provide for a 15% minimum corporate tax rate of 15% for large group companies located in the EU. Poland did not support the directive as drafted, and since unanimous consent of the member states is required to approve a directive, it was not approved. The directive will be added to the agenda for the next ECOFIN meeting on 24 May 2022. (See also the Estonia article in this issue.)
European Union: A proposed directive published by the European Commission on 23 February 2022 would establish a corporate sustainability due diligence duty. Companies in scope would be required to carry out human rights and environmental due diligence across their value chain and to embed sustainability and human rights considerations into their business strategy, decisions and oversight. The directive would apply only to large companies, setting out specific criteria (based on net turnover and staff employed in the EU) to determine whether companies are within scope.
European Union: The Council of the European Union completed its biannual review of the EU list of non-cooperative jurisdictions for tax purposes on 24 February 2022. The nine jurisdictions on the blacklist remain unchanged. However, the Council added the following 10 jurisdictions to the grey list: Bahamas, Belize, Bermuda, British Virgin Islands, Israel, Montserrat, Russia, Tunisia, Turks and Caicos and Vietnam. Gray list jurisdictions have made commitments to agree to good governance standards and reform their tax policies accordingly but remain subject to monitoring while they execute on their commitments. The grey list now comprises 25 jurisdictions.
European Union: The final text of the EU public country-by-country (CbC) reporting directive was published in the official journal on 1 December 2021 and became effective on 21 December. The CbC reporting directive will require multinationals with annual global consolidated revenue exceeding EUR 750 million and that are active in more than one EU member state to publish specific tax information on a country-by-country and an annual basis. EU member states must transpose the directive into their national laws by 22 June 2023.
International: The Joint Chiefs of Global Tax Enforcement (J5) issued a press release on 13 May 2022 in which they renewed their commitment to combat international tax crime and money laundering. The J5 heads of tax enforcement from Australia, Canada, Netherlands, the UK and the U.S. made the announcement during a week-long summit in London.
Ireland: On 14 April 2022, the Department of Finance launched a public consultation on the R&D tax credit and the knowledge development box. The consultation will consider the challenges facing companies that are active in the R&D and intellectual property space and the implications of domestic and international tax reforms for these two reliefs. Comments much be submitted by 30 May 2022.
Jamaica: The Ministry of Finance and the Public Service has informed the Jamaican tax authorities that the proposal to reduce the assets tax rate from 0.25% to 0.125, announced in 2020, will not take effect for the year of assessment 2022 due to the current economic uncertainty created by the COVID-19 pandemic. The current assets tax rate will remain in effect, and the government will subsequently provide more information on the effective date of the rate reduction.
Kenya: The government plans to increase the digital service tax (DST) rate from 1.5% to 3% in July 2022 with a view to increasing domestic revenue. The DST is a tax on the gross transaction value of tech companies.
New Zealand: The government launched a public consultation on 5 May 2022 on whether and how New Zealand should participate in the OECD-led global anti-base erosion (GloBE) proposal under Pillar Two. Comments must be submitted by 1 July 2022.
OECD: The OECD launched a public consultation on 6 May 2022 requesting comments on draft model rules relating to the intended regulated financial services exclusion under Amount A of Pillar One. Amount A introduces a new taxing right over a portion of the profits of large and highly profitable enterprises for jurisdictions in which goods or services are supplied or consumers are located. The draft model scope rules are designed to exclude the revenues and profits of regulated financial institutions from the scope of Pillar One Amount A. Six types of regulated financial institution are defined in the consultation document: depositary institutions, mortgage institutions, investment institutions, insurance institutions, asset managers and a mixed financial institution. A seventh category is added for a limited type of service entity that exclusively performs functions for a regulated financial institution. The definition for each type of regulated financial institution generally contains three cumulative elements: a licensing requirement, a regulatory capital requirement and an activities requirement. Comments must be submitted by 20 May 2022.
OECD: The OECD held a public consultation on 25 April 2022 to discuss the input received from the public on the implementation and application of the GloBE rules, which would implement the 15% global corporate minimum tax under Pillar Two.
OECD: The OECD held a public consultation during the period 22 March to 29 April 2022 on a new global tax transparency framework for the reporting and exchange of information on crypto-assets, as well as proposed amendments to the common reporting standard (CRS) for the automatic exchange of financial account information between countries. As set out in the consultation document, a Crypto-Asset Reporting Framework (CARF) would be introduced to bring cryptocurrency and other crypto-assets within the scope of a reporting obligation and the CRS would be revised to include e-money providers, to improve compliance and reflect more recent developments. The OECD is expected to release proposed new rules in October 2022.
Poland: The parliament is reviewing a draft bill that would provide for the formation of an “e-Tax Office” to be used by taxpayers, tax representatives, court enforcement officers, etc. to communicate with the Polish tax authorities and fulfil corporate and individual income tax and VAT compliance obligations. The bill also contains a rule on refunds of tax paid by nonresidents under which a refund would be paid only to the bank account indicated by the nonresident in order to make the processing of such refunds more efficient and eliminate potential fraud.
Singapore: The penalties for failure to comply with FATCA and CRS obligations were revised as from 16 November 2021. The penalties for failure to register or report all reportable accounts under FATCA increased to SGD 5,000, with an additional fine of SGD 100 per day for a continuing offence. Failure to perform due diligence on all financial accounts or failure to comply with any other requirements is subject to a fine of up to SGD 1,000, imprisonment for up to six months and SGD 50 per day for a continuing offence.
South Africa: The Minister for Finance in the 2022 budget speech delivered on 23 February 2022 announced that the corporate income tax rate would be reduced from 28% to 27% for tax years ending on or after 31 March 2023.
Sri Lanka: The 2022 budget, passed by the parliament on 10 December 2021, includes a one-time 25% surcharge that will be charged on individuals and companies that report more than SLR 2 billion as taxable income for year of assessment 2020/21. Impacted taxpayers were required to submit a tax return by 20 April 2022 and pay the tax in two equal instalments: one on 20 April 2022 and the second by 20 July 2022.
Switzerland: The Federal Council conducted a consultation between 11 March and 20 April 2022 on an amendment to the constitution to implement the global corporate minimum tax under Pillar Two of the OECD BEPS 2.0 project, as well as a temporary ordinance to ensure that the 15% minimum tax rate for multinational companies with annual turnover exceeding EUR 750 million comes into effect on 1 January 2024. A referendum on the constitutional amendment is expected to be held in June.
Thailand: The Revenue Department has provided guidelines for calculating income derived by individuals from trading cryptocurrencies and similar digital assets. The methods of calculation are the first-in-first out or moving average method and individuals are required to include the income in their tax returns. The guidelines also clarify the deduction of expenses and offsetting of losses in calculating income
Thailand: signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) on 9 February 2022, becoming the 98th signatory to the MLI. The government still must ratify the MLI and notify the OECD before the convention will enter into effect.
Turkey: A decree published at the end of 2021 reduced the domestic withholding tax rate on profit distributions by resident companies to nonresident individuals and companies from 15% to 10%. As a result, dividends paid to persons resident in a country that has not concluded a tax treaty with Turkey now benefits from a lower rate; dividends paid to persons resident in a country that has concluded a tax treaty with Turkey are subject to the new 10% rate where the treaty provides for a higher rate, but if the applicable treaty provides for a withholding tax rate below 10%, the treaty rate will continue to apply.