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In this issue:
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Belgium Implements Tax Changes to Boost Economy and Sustainability
Belgium has recently implemented significant tax reforms aimed at simplifying the system, promoting entrepreneurship, and encouraging sustainable practices. These changes have important implications for businesses operating in the country.
Starting from January 1, 2023, the reforms include a "basket limitation" rule that establishes a minimum taxable base, resulting in a de facto minimum taxation rate of 15%. The notional interest deduction will be abolished in 2024, impacting larger companies but potentially benefiting smaller enterprises.
To address double taxation, the calculation of foreign tax credits for royalties has been revised, and limitations have been placed on the R&D tax credit. These changes aim to streamline the tax system and promote fair taxation.
In addition to the implemented measures, the government has proposed further reforms to stimulate work, simplify taxes, and promote sustainability. These include changes to stock option plans, dividends received deduction, increased deductions and accelerated depreciation for sustainable investments, and requirements for patents to qualify for the innovation income deduction. The introduction of a minimum tax based on an EU directive, harmonization of VAT rates, and phasing out of fossil fuel subsidies are also under consideration. While the proposed reforms are still being debated, the Minister of Finance plans to present a draft bill by summer, with the goal of implementing the changes by January 1, 2024.
Belgium's tax changes reflect a commitment to creating a more efficient and sustainable tax system, providing businesses with new opportunities and promoting eco-friendly practices. Stay tuned for further updates as these reforms continue to unfold..
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Romania - Public CbCR reporting requirements apply as from 2023
Romania has implemented the CbCR directive, which requires companies in the country, including subsidiaries controlled by non-Romanian parent companies, to publish a CbCR report.
The implementation of the CbCR directive sets the reporting year to begin from 2023, giving companies 12 months from the end of their financial year to publish the report. The reporting threshold in Romania is total consolidated revenue exceeding RON 3.7 billion (approximately EUR 750 million) for two consecutive financial years for EU-based or headquartered multinationals. The reporting requirement also applies to standalone companies and subsidiaries controlled by a non-Romanian ultimate parent company.
The Romanian tax authorities will need to provide further clarification on the reporting obligations for medium and large subsidiaries with foreign ultimate parent companies. The CbCR report should cover the activities of the ultimate parent company and its affiliated entities, using a common template and electronic self-reading reporting format.
The CbCR report and statement must be made publicly accessible on the relevant entity's website, in Romanian and free of charge, within 12 months after the balance sheet date of the financial year. The documents must remain available on the website for five years. However, companies can be exempted from the website publishing requirement if they make the report accessible in a relevant business register and disclose this on their website.
Responsibility for preparing the CbCR lies with the members of the administrative, management, and supervisory bodies of the ultimate parent or standalone company, as well as personnel in charge of disclosure formalities for branches. Commercially sensitive information that could seriously harm companies' commercial positions can be omitted for up to five years.
Financial institutions governed by the National Bank and the Financial Supervisory Authority are subject to separate legislation, but they are also required to comply with the public CbCR provisions.
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Austria Introduces Draft Tax Regulations to Facilitate Cross-Border Reorganizations
Austria has released draft tax regulations to streamline cross-border reorganizations in line with the EU Mobility Directive. The directive aims to enhance cross-border mobility for companies and establish standardized frameworks for conversions, mergers, and divisions within the EU.
The proposed changes focus on cross-border divisions and expanding the Reorganisation Tax Act (RTA). The regulations address Austria's right to tax and the creation or restriction of this right when forming new companies inside or outside Austria. Provisions draw from existing tax rules for cross-border mergers.
The regulations also cover cross-border separations, offering new structuring possibilities. Separations are treated as taxable contributions for tax purposes, aligning with company law treating them as divisions. These regulations will have retroactive application to reorganizations occurring after January 31, 2023.
The proposed tax regulations aim to facilitate smoother cross-border reorganizations, offering companies greater flexibility and clarity within Austria and the EU.
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France - Companies making loss may not carry forward unused foreign tax credits
France's highest administrative court, the Conseil d'État, has issued a significant decision regarding the treatment of unused foreign tax credits. The court ruled on March 8, 2023, that these credits cannot be carried forward to future years.
The case involved a French group of companies whose head received foreign-source dividends and other income between 2008 and 2011. These dividends came with tax credits based on the tax deducted at source in foreign jurisdictions, as stipulated in relevant tax treaties. However, due to losses incurred in France during those years, the taxpayer was unable to utilize the tax credits associated with the foreign income. When the company eventually became profitable, it sought to offset its current French corporation tax liability using the unused foreign tax credits.
In France, most tax treaties grant companies generating income abroad a tax credit equivalent to the foreign tax paid on that income, which can then be used to offset their French corporation tax.
The Conseil d'État ruled that unused foreign tax credits cannot be carried over to subsequent years, aligning with previous court decisions in France. For instance, a 1991 ruling by the Conseil d'État specified that foreign tax credits could only be utilized in the year when the corresponding income was generated. Similarly, in 2017, the Constitutional Court determined that French legal provisions preventing companies from carrying forward foreign tax credits applied to all companies, irrespective of their financial results. A 2021 decision by the Montreuil Administrative Court upheld this case law, affirming that loss-making companies could not carry over unused foreign tax credits to future profitable years. Hence, it is evident that there is well-established case law on the matter of carrying forward unused foreign tax credits.
Furthermore, the Conseil d'État's decision confirmed that companies cannot seek a refund for any unused tax credits they have accumulated.