Welcome to the first issue of our new International Tax@OC Update. In these updates we will bring you topical international tax developments and explain what they could mean for your business.
Hitting the headlines for much of this year has been the withdrawal of the UK from the European Union. As the UK has now triggered Article 50 to begin its formal withdrawal process we have taken this opportunity to review the Tax implications of ‘Brexit’ and answer some questions about the UK’s withdrawal process.
Brexit is likely to have a significant impact on VAT throughout the EU and one area of particular concern is potential lost VAT revenues as a result of online sales. The UK government’s reaction has been to consider introducing a “Split Payment Method” (under which the customer pays the VAT element of the purchase price directly to the Tax Authorities rather than to the supplier) for the collection of UK VAT on online sales. Italy is already using this method in the public sector and has recently announced that it will be expanding the scope of this method to other areas of tax.
Many multinational companies have structures in place that involve management services being provided within a group. In this newsletter we look at how the Spanish tax authorities have begun to take a much more restrictive approach to the tax deductibility of such payments. We also review the new rules introduced in Belgium to prevent stock options that are granted directly to indiviudal managers who operate through management companies benefiting from the reduced valuation rates.
With the rise of the sharing economy and alternative business models, more and more people are seeking to earn extra income through non-traditional means such as renting out their homes through online platforms. We consider how Italy has introduced a new withholding tax on intermediaries involved in short-term lets; a development that many European countries are now considering.
We also look at how the Belgian Innovation Income Deduction has been used since its introduction in July 2016 and its effect on businesses within the life sciences, tech, media and comms and financial services sectors.
We hope you enjoy these articles. If you would like to discuss any of the issues raised in this update, please do get in touch with the author of the article or your usual Osborne Clarke contact.
UK | Government consults on introducing split payment model
The UK government has announced that it is considering whether a ‘Split Payment’ model would be feasible for overseas online supplies of goods to UK consumers
Italy | Change in law for VAT split payments
The effectiveness of the VAT split payment mechanism in combatting tax evasion invoicing transactions with the State and other public bodies has pushed the Italian government to expand the measure’s scope of application.
The new provisions will apply to invoices issued from 1 July 2017. Businesses should consider the effects that regulatory changes will have on them in the coming months.
Spain | Courts confirm stricter approach to deductibility of management fees
Tax audit proceedings are giving rise to an ever-increasing number of disputes as the Spanish Tax Authorities are adopting increasingly strict criteria in their interpretation of tax law. This trend appears to be supported by Spanish courts.
Belgium | Stock options: tax increase for stock options granted to management companies
The Belgian tax authorities have published a new circular in relation to the tax treatment of stock options that are granted directly to indiviudal managers who operate through a management company.
This circular letter confirms that such grants cannot benefit from the reduced valuation rate of 9% for the purposes of the Belgian stock option law.
Belgium | Tax incentive for life sciences, tech, media and comms and financial services
The Belgian Innovation Income Deduction, which has been in place since 1 July 2016, allows Belgian companies and Belgian permanent establishments of foreign companies, which are the owner licensee or rights owner of the IP rights and assets, to deduct 85% of the net income deriving from IP innovations for tax purposes. We consider how businesses can use this incentive in these key sectors.
Italy | Flat withholding tax rate introduced for short-term lets
Intermediaries involved in both the formation of short-term rental contracts and paying rentals will be required to make a 21% withholding from rental payments they make. The rules are applicable to contracts entered into from 1 June 2017, for residential leases for periods not exceeding 30 days.