CCW Business Solutions

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Taxing the digital economy

The structure of the business world has changed beyond what was imaginable less than a lifetime ago. Traditional tax legislation was founded on a fixed, stable business model where origin and profit generation was easy to identify.

Existing tax laws seldom fit the virtual world and digital economy of today. International tax frameworks are being reviewed to explore how tax can effectively and fairly be levied on the digital economy. The aim is for a global unified approach to be identified by 2020.

The shift of emphasis is well illustrated by the business structure of popular digital platforms. The platforms become popular and gain market share by attracting active users who like to share content with others. 

The platform makes its profit from advertising revenue. So the users are key to the platform’s success whilst not generating revenue directly for the business. Yet without the active users there would be no demand for advertising. The tax issue arises in determining which country is entitled to levy tax on the revenue of the business.

The need for a fair global tax framework was identified by the Inclusive Framework in the G20 Base Erosion and Profit Shifting (BEPS) project of the Organisation for Economic Co-operation and Development (OECD). The aim is for more than 115 jurisdictions to work together towards a common tax approach by 2020. The need to address fair taxation of the digital economy is included in this project, along with a number of other international taxation objectives.

The thorny issue of each individual country’s different company taxation legislation and the need to have a unified approach to cross-boundary and intangible business models is sure to be interesting. Our tax team will keep you up-to-date with progress.

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Crowe have mergers and acquisitions specialists in Ireland. We can make the connection for you if you need to know more.

New M&A thresholds in Ireland

From 1 January 2019 Irish turnover thresholds determining whether deals have to be approved by the Competition and Consumer Protection Commission (CCPC) have been raised.

This is good news for mergers and acquisitions and will mean an estimated 30% more deals will process more swiftly in Ireland as they no longer need to go be notified to and approved by the CCPC. The new threshold is €10 million which is a significant upward move from the former €3 million limit.vThis provides simplification and swifter completion for most merger deals.

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Australian Taxation Office (ATO) audits

It is increasingly important that Australian businesses are able to demonstrate their Tax Risk Management Charter is working in practice.

Tax governance is a high priority for ATO when reviewing private groups and large public and multinational businesses.

Large businesses in Australia should expect an ATO audit at some stage. Many businesses are not well prepared and would benefit from advice to ensure they are ready for an audit. 

The Crowe team in Australia conduct Prudential Tax Audits. These include income tax, goods and services tax, fringe benefits tax and superannuation guarantee. The exercise either provides comfort to management or highlights areas needing attention.

The risk assessment highlights any issues likely to give rise to adverse tax consequences from the ATO.

Advice on ATO audits and proactive support via a Prudential Tax Audit is available from the Crowe team in Australia. We can make the connection if you want to find out more.

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Case law: VAT on transfer pricing adjustments (Italy)

Recent case law in Italy gave a ruling on whether VAT applied to additional remuneration made by agreement to bring the applicant up to the minimum profit level provided in a group transfer pricing policy.

The case considered the European Commission’s Working Paper No. 923/28.02.2017 regarding links between such amounts and the supplies of goods/services. It also considered the narrower application of VAT Directive (2006/112/EU). The application of the rules in this directive are at the discretion of EU member states and are for the purpose of preventing tax avoidance and evasion in specific cases, which are listed in detail in the directive.

In view of the detail in the directive the Court of Justice found that member states cannot deviate from the list.

In the specific case no direct link was identified between the transfer pricing adjustments and the supply of goods and services. For that reason the additional remuneration could not give rise to a change in the VAT base of the transactions./p>

Commercial property tax in Poland

From June 2018 owners of commercial buildings in Poland have to pay an  additional so‑called ‘minimum tax’ of 0.035% based on the initial value of their property portfolio.

The tax applies to commercial buildings made available under a rental, lease or other similar agreement and includes shopping centres as well as individual buildings. Vacant areas of properties are not subject to the tax. The tax-free limit is 10 million Polish Zloty (PLN). This single exemption applies to the owner, or joint owners together, regardless of the number of buildings in their portfolio. Tax avoidance measures are included in the legislation such that any transfer of ownership needs to be made for sound economic/commercial reasons and not with the intention of simply avoiding the tax. 

The minimum tax is levied in addition to corporate tax. Provisions exist for refunds in certain cases where the total tax liability becomes excessive. If you are affected by this property tax we can make the connection for you to get appropriate advice.

 

Overturn of Polish social security proposals

Poland

Following a decision by the Polish Constitutional Tribunal in November 2018, the limit of income above which social security contributions are not due to the Social Insurance Institution (ZUS) in Poland will remain unchanged in 2019.

There had been proposals to cancel the limit for contributions to pension and disability insurance which would have caused an increase in payroll costs and a decrease in net remuneration for higher earners.

The overturn of the proposals was granted due to an irregularity during the voting process in the upper house of the Polish parliament.

 

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Crowe Singapore show why Singapore is a great place to do business.

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If you want to investigate the opportunities of Singapore, we can make a connection for you.

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CCW Business Solutions is affiliated with Crowe U.K. LLP.
Richard Austin
Richard Austin
Partner, Head of Global Business Solutions
Cheltenham