Please download the full version of our tax update below.
Topics addressed in this update include the next steps in the implementation of the global agreement on Pillar One and Pillar Two, the European Commission’s proposals on the abusive use of shell entities and on debt financing as well as developments in tax transparency and transfer pricing. For Multinational Enterprises (‘MNEs’) that may be affected by Pillar Two, 2023 will be the year to assess the impact and potential actions needed to mitigate undesired effects. In transfer pricing, we see more and more multi-jurisdictional audits and multilateral agreement procedures. MNEs may want to prepare what to do in case they have to face these procedures.
In addition, we have included some current tax developments in Belgium, the Netherlands, Luxembourg and Switzerland that might have an impact on MNEs. You will appreciate that the nature of these developments differs per country, so our aim has been not to discuss the same topics for each country.
Two-Pillar solution
The 2021 agreement on reallocating taxing rights to market jurisdictions (‘Pillar One’) and on the introduction of a global minimum taxation (‘Pillar Two’) has been joined by 137 members of the OECD/G20 Inclusive Framework (the ‘Inclusive Framework’).
EU Business Taxation for the 21st Century
On 18 May 2021, the European Commission issued a communication on Business Taxation for the 21st Century (‘Communication’). The announcements made in the Communication will translate into legislative proposals in the years up to and including 2024 and will have a significant impact on MNEs’ taxation and reporting obligations. On the one hand, the legislative proposals aim to increase transparency, making it easier for tax authorities to counteract and deny tax benefits and create some dissuasive effect for MNEs due to potential adverse publicity exposure. On the other hand, they contain targeted measures that, amongst other things, ensure effective taxation and support green and digital transitions. Since then, the European Commission has launched several public consultations and legislative proposals. The initiatives outlined below are relevant for MNEs.
Other EU and international developments
Tax transparency
As part of the European Commission’s continued efforts to enhance tax transparency within the single market, during 2022 several transparency measures have been adopted and/or proposed within the EU. While, in some cases, these measures aim to cover emerging economic phenomena (e.g. the platform and crypto economies), in others the measures aim to combat tax avoidance by means of using ‘public scrutiny’ and/or ‘reputational pressure’ on the corporate income taxes borne by MNEs carrying out cross-border activities in the EU.
The following paragraphs offer a short overview of these measures which include (i) the DAC7 Directive, (ii) the DAC8 initiative, (iii) the Public CbCR Directive, (iv) the still awaited proposal on the publication of the effective corporate tax rate, and (v) the tax reporting requirements included under the Unshell Proposal.
As if the neverending shifting in tax compliance frameworks would not be enough of a challenge, MNEs must also address the rise of Corporate Social Responsibility (‘CSR’) and Environmental Social and Governance (‘ESG’) awareness, in relation to which taxation is playing a more and more prominent role. As a consequence of this CSR/ESG trend, mere compliance with mandatory tax reporting obligations under existing regulatory regimes is already viewed as inadequate by a large part of the CSR/ESG community.
All these recent developments have demonstrated that the global push for greater tax transparency has still momentum in the global tax agenda and that policymakers’ actions in this field are far from over.
The Netherlands - Domestic developments
Belgium - Domestic developments
Luxembourg - Domestic developments
Switzerland - Domestic developments
Contact
Do you have any questions on the impact of these trends and developments or do you wish to receive more information? Please feel free to contact your Loyens & Loeff adviser.
