BEPS newsEstonia - Income Tax Law Amendments Proposed
The proposal to implement the requirements of the EU Anti-Tax Avoidance Directive was approved by government on 26 September 2018. If adopted by the parliament, the amendments will enter into force on 1 January 2019. The following rules will be implemented: Interest limitation rule Deduction of interest expenses will be limited if the borrowing costs in a financial year exceed EUR 3 million and the borrowing costs exceed 30% of EBITDA. Exit tax If a resident company transfers assets from Estonia to its permanent establishment in another state, income tax will be charged on the amount which equals to the fair market value of the transferred asset. If a resident company transfers its tax residency away from Estonia, income tax will not be levied on capital repayments that are equal to capital contributions. If tax residency or assets are transferred within EEA Member States, the payment of exit tax may be deferred by way of payment in instalments over a period of 5 years. General anti-abuse rule Under the proposal, the existing general anti-avoidance rule will be replaced by new provisions. The original provision, which specifically prohibited the abuse of the exemption on dividend distributions, will be annulled. The new rule will broaden the scope of the GAAR and will be applicable to all types of income and transactions. Controlled foreign company rules CFC rules existed in Estonia before, but were applicable only to transactions conducted by individuals. According to the proposal, a CFC is defined as an enterprise in which the resident company alone or together with related parties holds more than 50% of the shares, profits or voting rights; or a permanent establishment. If these subjects are something which you find interesting and would like to discuss further we are happy to be at your service. Contact us at sales@comtaxit.com. Local tax newsOn 18 September 2018, the Tax Plan 2019 and a bill to implement the EU Anti-Tax Avoidance Directive (EU) 2016/1164 were presented to the lower house of the parliament. The most important proposals are summarized below.
(i) CIT Rate: with effect from 1 January 2019, the corporate income tax rate will be 19% for taxable income up to EUR 200,000, and 24.3% on the excess (currently 20% and 25%, respectively). The rates will be further reduced to 17.5% and 23.9% (in 2020), 16% and 22.25% (in 2021), respectively. (ii) Losses: the loss carry-forward will be reduced from 9 to 6 years from 2019. (iii) GAAR: A GAAR, as required by the ATAD 1 Directive, will not be introduced because this requirement is deemed to be met by the fraus legis concept, developed under case law. This concept applies to constructions which are held to be against the aim and purpose of a law. (iv) CFC: the Bill provides for the introduction of special CFC legislation for income generated by CFCs established (a) in jurisdictions with a statutory rate of less than 7% or (b) established in non-cooperative countries that are blacklisted by the EU. For the application of the CFC rules, a controlled company is defined as a company in which a company (alone or together with related persons) directly or indirectly holds and interest of more than 50% in the capital, voting rights or an entitlement to the profits. (v) Earnings stripping rule: the net interest deduction will be restricted to the highest of: 30% of the earnings before EBITDA; or EUR 1 million. (vi) Exit taxation: Currently companies which transfer the place of effective management to another EU Member State may pay the arising tax claim in 10 installments. Under the Bill, this period will be reduced to 5 years. The tax authorities may request that a guarantee is provided if the tax inspector deems it plausible that a serious risk exists that the tax claim cannot be collected. If these subjects are something which you find interesting and would like to discuss further we are happy to be at your service. Contact us at sales@comtaxit.com. BEPS newsFinland - Changes to CFC Rules are Expected
On 6 August 2018 it was announced that interested parties may submit their comments on a draft law amending CFC legislation. The purpose of amendments is to align current rules with the EU Anti-Tax Avoidance Directive 2016/1164. The main features of the proposal are listed below. A CFC would be established: (i) if the taxpayer by itself, or together with its associated enterprises holds directly or indirectly at least 25% of the voting power, or owns directly or indirectly at least 25% of the capital, or is entitled to receive at least 25% of the profits, or of the yield of the entity's assets (currently 50%); and (ii) if the effective rate of tax in the entity's state of residence is less than 3/5 of the Finnish CIT rate. The regime would not include CFCs resident in an EEA state provided that the CFC carries on a substantive economic activity. The same would apply also to CFCs resident in non-EEA states provided that the CFC is not resident in a jurisdiction listed in the EU list of non-cooperative jurisdictions or if there is an agreement in place allowing exchange of information for tax purposes. If these subjects are something which you find interesting and would like to discuss further we are happy to be at your service. Contact us at sales@comtaxit.com. |
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