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The Global View

What you need to know about trading globally.

Winter 2019/20
26/11/2019
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Ireland
France
Netherlands
Poland
Singapore
Germany
UK
Channel Islands

CCW Business Solutions

Helping companies administer successful international strategies.

Ireland

Capital gains tax and disposal of shares
A capital gains tax participation exemption is available to Irish resident companies on the disposal of a shareholding interest, provided a number of conditions are met.high rise flat

The conditions are set out in detail in S626B of the Taxes Consolidation Act. Some of the key conditions include:

  • the company making the disposal must hold at least a 5% shareholding for a continuous period of 12 months within the 24 months prior to disposal
  • the company whose shares are being disposed of must be tax resident in an EU member state, or a country with a double taxation agreement with Ireland
  • the company whose shares are being disposed of must be wholly or mainly (greater than 50%) carrying on a trade or trades.

If this is of interest please contact us to discuss in more detail.

Imports and exports 

Port with containersCurrently, transactions between businesses in Ireland and the UK are treated as intra-Community transactions and VAT is charged on a reverse charge basis. This means that the purchaser must account for the VAT as if they had made the supply themselves, which generally results in a VAT neutral transaction (for fully VATable activities) as businesses can immediately reclaim the VAT charge.

After Brexit, the UK will become a “third country” (non-EU) for VAT purposes and all supplies to and from the UK will be treated as exports and imports.

Goods supplied to the UK following Brexit will be deemed to be exports. The VAT rate applicable to exports from Ireland to non-EU countries is 0%.

VAT registration

Certain simplification measures exist in the EU to reduce administration and compliance burdens on cross-border trade. This includes triangulation and the VAT Mini One Stop Shop Scheme (MOSS).

Triangulation involves two supplies of goods between three VAT-registered traders in three different EU member states and enables the avoidance of VAT registration by a middle supplier. Following Brexit, the UK will no longer be able to benefit from this measure and Irish-based business will be required to register for VAT in the UK where the UK business is a middle supplier.

MOSS reduces the administrative burden and cost on businesses for the supply of telecommunications, broadcasting and electronic (TBE) services to non-taxable customers. Use of the scheme allows businesses to only have to register for VAT in one EU member state rather than each of the member states it is supplying services to. Following Brexit, it is likely that Irish businesses selling TBE services to customers in the UK may no longer be able to avail of MOSS in respect of their UK customers and will have to charge Irish VAT at the current standard rate of 23% which may put such supplies at a competitive disadvantage.

Distance selling

Distance selling occurs when goods are supplied to a private consumer in another EU member state. Where the sales exceed a certain threshold, the supplier must register and account for VAT where the consumer is located.

Following Brexit, the distance selling thresholds will no longer apply in relation to the supply of goods from Ireland to the UK and vice versa. Instead, all sales from the UK to Ireland and other EU Members States will be subject to import VAT and customs duties by the customer.

VAT refunds

Currently, an Irish registered business who has paid VAT in another EU member state can claim the VAT back from the other EU member state under the Electronic VAT Refund (EVR) scheme.

Following Brexit, UK VAT incurred by Irish businesses can no longer be claimed using the EVR scheme. Instead, Irish businesses will have to use the 13th VAT Directive Claim procedure which is a much slower process.  This will again impact SMEs in particular as they struggle to adjust their cash flows.

Irish businesses should review their strategy with regard to the likely impact of Brexit on their business and try to minimise any negative VAT impact as much as possible.

New law requires companies to identify beneficial owners

The European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2016 (the “Regulations”) affect all Irish companies and other corporate bodies. They require them to obtain and maintain accurate information in respect of their beneficial owners and to put a beneficial ownership register in place. The main aim is to ensure that individuals with significant interests in a company can be easily identified for the purposes of customer due diligence to guard against money laundering.

Exclusions

The Regulations do not apply to a company or entity that is listed on a regulated market and subject to disclosure requirements consistent with EU law or subject to equivalent international standards that ensure adequate transparency of ownership information.

What is a Beneficial Owner?

Under the Regulations, a beneficial owner is an individual who ultimately owns or controls, through direct or indirect ownership, over 25% of the share capital or voting rights of a company or who has the ability to exercise dominant influence or control over a company.

What are the obligations?

Every Relevant Entity must:

  • create a register of their beneficial owners. Such register must include the name, date of birth, nationality and residential address of each beneficial owner, the date on which the individual was entered into the register as a beneficial owner, the date on which the individual ceased to be a beneficial owner and a statement of the nature and extent of the interest of each beneficial owner
  • take “all reasonable steps” to identify the individuals who are the beneficial owners
  • keep records of the actions taken to identify the beneficial owners.

Creating and maintaining a beneficial ownership register

  • The Relevant Entity should prepare and issue a notice to each individual whom it believes is a beneficial owner requesting the information required under the Regulations. Each individual has one month from the date of the notice to confirm whether he or she is a beneficial owner and if they are a beneficial owner, they must confirm that the details in the notice are correct.
  • Failure to comply with the notice within the one-month window is a criminal offence and on summary conviction, can result in the imposition of a fine of €5,000.
  • The Relevant Entity may also serve a notice on any individual who is believed to be aware of the identity of other individuals who may be beneficial owners. The failure of the individual to respond to this notice within one month is an offence which can result in the imposition of a fine of €5,000.
  • Once the register has been established, where there is reasonable cause to believe that there has been a change in the details of a beneficial owner on the register or that an individual has ceased to be a beneficial owner, a notice should be prepared and sent to the individual concerned. The individual should confirm that the change is correct within one month of receiving the notice.

What happens if a Relevant Entity cannot identify its beneficial owners?

If the Relevant Entity has not been able to establish the identity of the beneficial owner(s) or if there is any doubt as to whether an individual so identified is indeed a beneficial owner, then it must enter the details of one or more individuals who are its senior management officials (defined as the board of directors and a chief executive officer) on the beneficial ownership register. The Relevant Entity must document and record all steps used to establish the identity of its beneficial owners.

Budget 2020

The Irish Budget 2020 was announced on 8 October 2019.  As well as Brexit considerations, several tax changes were announced.

Commercial property stamp duty

With immediate effect from 8 October 2019 stamp duty on commercial property transactions has risen 1.5% to 7.5%.  Changes have also been implemented to:

  • valuation of properties held in Real Estate Investment Trusts (REITs) on exit
  • interest deductibility limitations on Irish Real Estate Funds (IREFs).

France

 New digital services tax 
Technology giants and indeed most businesses based on a digital business model will be affected by the new digital services tax which was passed on 11 July 2019 by the French Parliament. It applies retrospectively to taxable digital services provided since 1 January 2019.

The new tax will be levied at 3% on gross revenues from two activities:

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  • provision of a digital interface enabling users to enter into contacts and to interact with others (“intermediary services”). Some specific exclusions apply largely relating to communication and payment services
  • provision of services to advertisers that aim at placing targeted advertising messages on a digital interface based on data collected about users and generated upon the consultation of such interface.

This will effect individual companies and groups which received revenue from taxable digital services during the previous calendar year in excess of:

  • €750 million for taxable digital services supplied worldwide
  • €25 million for taxable digital services supplied in France. 

The new tax is due in two instalments in April and October in the year following supply.  Transitional rules apply for 2019.

Non-EU companies, as well as appointing a tax representative, need to collect clear data on provision of taxable digitable services.

Netherlands

Residency and work permits
To simplify the procedures for residency and work permits in the Netherlands, the employer should consider registering as a recognised sponsor with Public Register of Recognised Sponsors. Where the employer wishes to employ someone as a highly skilled migrant, registration is obligatory.

The main advantage for most residency and work permits is speed. Less documentation is required and the decision by the Immigration Service is made within two weeks instead of three months.

Requirements to become a ‘recognised sponsor’

Each company registered on the Dutch Commercial Register can apply to become a recognised sponsor.

pedestrian walkingA company which has been active for less than 1.5 years in Netherlands will need to produce a business plan. This will be assessed by the Netherlands Enterprise Agency (RVO). The RVO look to see whether continuity and solvency of the company is guaranteed. If so, the RVO inform the Dutch Immigration Services (IND) accordingly and the company will usually be able to register as a recognised sponsor.

If a company has been active (and registered) in the Netherlands for more than 1.5 years, then normally no business plan is required. Provided the company has no tax debts, the Dutch Tax Authorities will provide the company with a payment confirmation statement and the company can be registered as a recognised sponsor.

The Dutch Immigration Service charges a one off fee of €3,927 for registration of a recognised sponsor. This fee is reduced by 50% if the company or group can prove that they have no more than 50 employees worldwide.

Withholding tax exemptions

On 26 February 2019, the European Court of Justice (ECJ) issued two judgments on the withholding tax exemption in the Interest and Royalties Directive and the Parent-Subsidiary Directive. The decisions of the ECJ have caused an upheaval in the world of tax and are seen as a game changer.

Business structures incorporated in the EU will not be able to apply the withholding tax exemptions as a result of these judgements if the structures are deemed abusive.

Even though these cases concern EU law, non-EU investors can also suffer the consequences.

Dutch tax law does not currently contain a withholding tax on interest and royalties. At this point, recent EU-cases on this point are therefore especially relevant for dividend distributions made by Dutch companies.

The Dutch government has proposed a withholding tax on interest and royalties from 2021.

The Dutch legislator has updated the anti-abuse measures in its domestic dividend withholding tax exemption. According to the anti-abuse measures, the exemption will be granted if certain predetermined safe harbor requirements are met. The question has been raised, taking recent ECJ judgements into account, whether these safe harbor requirements are in fact always safe. It is not yet clear whether this is sufficient to distinguish genuine structures from abusive structures.

Poland

Exit tax
Exit tax - taxation of unrealised capital gains – has been introduced and is in force from 1 January 2019. This tax is subject to:
  • transfer of assets or their part(s) outside Poland, for instance transfer of assets associated with Polish based activities to a foreign company, as a result of which Poland will partly or entirely lose the right to tax the proceeds from their disposal 
  • change of tax residence, as a result of which Poland will partly or entirely lose the right to tax income (irrespective of whether the asset was actually disposed of or not) will be subject to this new tax – exit tax. The surplus of the market value of the transferred asset over its tax value (value not recognised previously as tax deductible costs, in any form, that would have been treated by the taxpayer as tax-deductible cost had it been sold) will be treated as tax base. 

Implementation of the ATAD Directive on counteracting tax avoidance has caused this tax to be introduced. For legal entities the rate of 19% will apply.

However, Polish regulations went beyond this directive and the new tax also covers individuals.  In the case of individuals two rates of exit tax are provided: 3% applicable when the tax value of the asset is not determined, and 19% for financial assets over four million PLN.

The new regulations provide that the taxpayer may receive a refund of the exit tax paid. This will be possible if within five years (from the end of the month of the transfer of the assets), they are transferred back to Poland. In the case of tax residence, if within five years (from the end of the tax year in which the tax residence has changed), the taxpayer becomes a tax resident in Poland again
Intellectual property 

From 1 January 2019, revenues from business use of intellectual property (IP) rights generated, developed or improved as a result of research and development (R&D) or acquisition of R&D services are subject to taxation with a preferential 5% CIT/PIT rate.

Regulations regarding IP Box (Patent Box) are to be an incentive for taxpayers conducting R&D activity.  These regulations do not exclude the possibility of using R&D relief. The IP Box incentive has been implemented and operates in other countries, including Slovakia, United Kingdom, Netherlands and Luxembourg.

The reduced tax rate will apply to income from the following qualifying IP rights:

  • rights to the invention (patents) and additional protection rights for the inventionRoad at dusk
  • protective rights for the utility model
  • rights from the registration of an industrial design
  • rights from registration of the integrated circuit topography
  • additional protection rights for a patent for a medicinal product or plant protection product
  • registration of the medicinal and veterinary product authorised for trading
  • rights from registration of new plant varieties and animal breeds
  • rights to a computer program.

In order to benefit from the reduced tax rate, these rights must be subject to legal protection under the provisions of separate acts or ratified international agreements to which Poland is a party or other international agreements to which the European Union is a party.

It is possible to apply the new provisions to expectation of these IP rights in relation to an application filed with the competent authority.

Singapore

Digital payment tokens
The Inland Revenue Authority of Singapore (IRAS) issued a draft e-Tax Guide titled “GST: Digital Payment Tokens” on 5th July 2019 (draft tax guide) to update its stance regarding the treatment of digital payment tokens under the Goods and Services Tax (GST) Act.

In 2014, the IRAS posted on their website that supply of virtual currencies will be treated as a taxable supply of services. This is because virtual currencies are not considered as ‘money’ for GST purposes and, as such, it does not qualify for GST exemption.

The term ‘virtual currencies’ was not explicitly defined by the IRAS, but the understanding was that all type of digital tokens and cryptocurrencies were treated the same for GST purposes. This gave a need to provide a concession for virtual currencies used in the gaming world (i.e. where they are exchanged for virtual goods or services within the gaming world, GST need not be charged until they are exchanged).

In the draft tax guide, the IRAS has made a distinction between digital tokens or cryptocurrencies that function or are intended to function as a medium of exchange (referred to as ‘digital payment tokens’) and digital tokens or cryptocurrencies that do not qualify as digital payment tokens. This distinction is made because the new GST treatment only applies to digital payment tokens. The GST treatment for digital tokens and other crypto assets that do not qualify as digital payment tokens remains unchanged.

With effect from 1 January 2020, where digital payment tokens are provided as consideration in a transaction other than for a supply of money or digital tokens, the supply of those tokens will no longer be treated as a supply of goods or services.

In addition, the exchange of digital payment tokens for fiat currency or other digital payment tokens will be treated as an exempt supply.

he new GST rules are good news for issuers of digital payment tokens and is likely to make Singapore more attractive for blockchain innovation. However, it is important for would-be issuers to ensure that the tokens they are issuing qualify as digital payment tokens.

The new GST treatment will also mitigate the problem of buyers of digital payment tokens suffering GST twice, for example at the point of purchase and at the point of redemption.

Under the new rules, digital tokens/cryptocurrencies can be classified into three groups:

  1. qualifying as digital payment tokens as defined by the IRAS
  2. not qualifying as digital payment tokens and falling under the prescribed list of exempt supplies under the GST Act
  3. not falling within the first two categories - GST treatment can then be applied according to this classification.

The draft tax guide indicates that hybrid tokens may potentially fall within the definition of digital payment token if certain conditions are met. Hybrid tokens are defined in the draft tax guide as digital tokens issued via an Initial Coin Offering (ICO) to fund the development of certain products, services or infrastructure that will eventually give access to products and services on the funded ecosystem to the holders of the tokens. Such tokens may also be traded on exchanges.

The draft guide stipulates that the hybrid token will qualify as a digital payment token if it has all the characteristics of a digital payment token and it can still potentially be used as a medium of exchange even after it has been used to obtain a product or service on the ecosystem.

The effective date of 1 January 2020 for the new GST rules coincides with the effective date for the Overseas Vendor Registration scheme. This prevents unnecessary hurdles limiting the progress Singapore has made in the past few years as a blockchain and cryptocurrency innovation hub.

Tax and the law for business visitors

Foreign businesses that do not have a legal presence in Singapore may send their employees to Singapore for a variety of reasons encompassing business and non-business related activities. 

Evaluating and understanding the tax and non-tax implications of sending employees to Singapore will help in mitigating hidden risks and penalties for non-compliance.

Beyond tax, foreign businesses sending employees to Singapore need to ensure they are compliant with other regulatory requirements such as company law, labour law and social security requirements.

Shaking handsExamples of activities undertaken by such employees may include performing market studies, participating in trade shows, meeting prospective customers, supervising projects for customers, providing after-sales technical advice and support, managing customer relationships, sourcing for goods and services, managing vendor relationships, undertaking installation projects, conducting trainings, negotiating customer contracts and working on short-term projects. Some of these activities could be undertaken for related parties.  

The type of work performed and the duration and regularity of the work will have a bearing on the tax liability for both the foreign business and its employees. With appropriate planning in advance, it may be possible to minimise the tax consequences.

Germany

R&D tax incentives 
Germany has strong funding programs aimed at encouraging companies worldwide to carry out R&D in Germany.

The Federal government has a strategy to prioritise R&D aimed at solving global challenges and driving innovation.

Lead markets and priorities

  • Climate/Energy
  • Health/Nutrition
  • Mobility
  • Security
  • Communication
 

 Key technologies

  • Information and Communication 
  • Optical 
  • Production
  • Materials 
  • Biotechnology
  • Nanotechnology
  • Microsystems
  • Innovative Services
    Source: Germany Trade & Invest (GTAI)

As well as the prioritised sectors shown in the table above, there are other R&D subsidies available for technological advance. These are aimed primarily at small and medium-sized enterprises (SMEs). The best-known is the Zentrales Innovationsprogramm Mittelstand (ZIM) - “Central Innovation Program for SMEs” – which aims to promote innovation and competitiveness.

As well as the Federal government’s programmes, the German state governments also provide innovative R&D programs which are normally open to all types of technology

One alternative to subsidies is special R&D credit programmes that promote innovative projects. These programmes are open to all types of technology and generally cover higher R&D costs.

There are also venture capital programmes for start-up technology companies which normally have to rely on their own capital.

UK

Double tax treaties – territories recently excluded
If your company has a maximum of 50 staff, and either a turnover of less than €10 million or assets of less than €10 million, then dividends received from Hong Kong, Falkland Islands and Faroe Islands are no longer exempt from Corporation Tax.People looking at laptop

HMRC has updated its list of double tax treaties. The non-inclusion of various territories with new treaties (such as Jersey) is notable, as is the removal from the list of several territories (including Hong Kong, Falkland and Faroe Islands).

HMRC has taken this position on the basis that such territories are not ‘states’.

Groups with entities in these jurisdictions need to consider any applicable tax implications, especially where reliance has been placed on a territory’s previous inclusion in HMRC’s list.

Channel Islands

Economic substance law
The Channel Islands introduced new ‘economic substance’ laws from 1 January 2019 that conform to the EU’s Code of Conduct Group (Business Taxation) (COCG).

The laws also apply in Isle of Man and require tax-resident companies to comply with economic substance tests.

Tax-resident companies will need to satisfy a three-part economic substance test.  They must be:

  • directed and managed in Guernsey or Jersey
  • conduct Core Income Generating Activity (CIGA) there
  • meet requirements with regard to the levels of personnel, physical presence and operating expenditure in the islands.

Any company which fails the test could suffer significant fines or be struck off.  The laws apply to tax-resident companies in Guernsey, Jersey and Isle of Man active in:

  • banking
  • insurance
  • fund management
  • headquarters
  • shipping
  • holding companies
  • distribution
  • service centres
  • finance and leasing or intellectual property.
Learn more on the changes that could affect you or your business.

International labour law

Crowe HR advisory outline the latest rights and duties for employees and employers.

This month shows developments in the EU, France, Poland, Spain, UK, Switzerland Australia and Canada. 

Read our latest developments

Contact us

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