5 June 2021

G7 Finance Ministers Agree Global Tax Agreement

•         Pillar One: This will apply to global firms with at least a 10% profit margin. 20% of any profit above the 10% margin will be reallocated and then taxed in the countries they operate (not just where they have their headquarters).

•         Pillar Two: The G7 also agreed to the principle of at least 15% global minimum corporation tax operated on a country-by-country basis.

G7 members are Canada, France, Germany, Italy, Japan, the UK, and the USA, plus the EU.

https://www.g7uk.org/g7-finance-ministers-agree-historic-global-tax-agreement/

9 July 2021

The OECD announced that 132 member jurisdictions had so far agreed to a Statement dated 1 July 2021 on a Two-Pillar Solution to Address the Tax Challenges Arising From the Digitalisation of the Economy (the “Statement”).

A detailed implementation plan is to be finalised by October 2021. It is intended that both Pillars will come into effect in 2023.

Pillar One will apply to multinational enterprises (MNEs) with global turnover above €20bn and profitability above 10%. Extractives and Regulated Financial Services are excluded. For in-scope MNEs, between 20-30% of profit in excess of 10% of revenue will be allocated to market jurisdictions from which the MNE derives revenue. This will be implemented by a multilateral instrument. The Statement contains more details. There will be appropriate coordination between the application of the new international tax rules and the removal of all digital service taxes and other relevant similar measures.

Pillar Two will consist of 2 interlocking domestic rules (together the Global anti-Base Erosion Rules - "GloBE") and a treaty-based rule (the Subject to Tax Rule - "STTR").

The GloBE rules will be rules of domestic law. They will comprise:

•         an Income Inclusion Rule ("IIR"), imposing top-up tax on a parent entity in respect of the low taxed income of a constituent entity; and

•         an Undertaxed Payment Rule ("UTPR"), denying deductions or requiring an equivalent adjustment to the extent the low-tax income of a constituent entity is not subject to tax under an IIR.

The minimum tax rate for purposes of the IIR and UTPR will be at least 15%.

The GloBE rules will apply to MNEs that meet the €750 million threshold as determined under BEPS Action 13 (country by country reporting). Countries are free to apply the IIR to MNEs headquartered in the country even if they do not meet the threshold.

Government entities, international organisations, non-profit organisations, pension funds or investment funds that are Ultimate Parent Entities of an MNE Group are not subject to the GloBE rules. Nor are holding vehicles used by such entities, organisations, or funds.

The GloBE rules will exclude an amount of income that is at least 5% (in the 5-year transition period, at least 7.5%) of the carrying value of tangible assets and payroll. There will also be a de minimis exclusion and an exclusion for international shipping income.

The GloBE rules will have the status of a common approach. This means that members of the OECD/G20 Inclusive Framework on BEPS are not required to adopt the Globe rules.

The STTR will allow source jurisdictions to impose limited source taxation on certain related party payments subject to tax below a minimum rate.

The Statement contains more details about both Pillar 1 and Pillar 2.

https://www.oecd.org/tax/beps/statement-on-a-two-pillar-solution-to-address-the-tax-challenges-arising-from-the-digitalisation-of-the-economy-july-2021.htm

17 June 2021

In Austria, certain claims for benefits under the UK-Austria Double Tax Convention must be submitted on a specified claim form that has been certified by Her Majesty’s Revenue and Customs (“HMRC”). HMRC confirms the claimant is UK resident under the Convention by providing a “wet ink” stamp and signature on the claim form.

The UK and Austria agreed in August 2020 that HMRC would temporarily provide a Certificate of Residence signed using the issuing officer’s electronic signature. This arrangement was to expire on 30 June 2021, but has now been extended to 30 September 2021.

https://www.gov.uk/government/publications/austria-tax-treaties/uk-austria-double-taxation-convention-competent-authority-agreement-signed-in-june-2021-in-force--2

16 July 2021

Social security contributions

HMRC have updated their guidance on National Insurance (social security contributions) for workers from the UK working in the EEA or Switzerland to cover situations where a worker’s work location has changed temporarily because of coronavirus (COVID-19) travel restrictions.

https://www.gov.uk/guidance/national-insurance-for-workers-from-the-uk-working-in-the-eea-or-switzerland

HMRC have also updated their guidance on social security contributions for workers coming to the UK from the EEA or Switzerland to cover situations where a worker’s work location has changed temporarily because of coronavirus (COVID-19) travel restrictions.

https://www.gov.uk/guidance/social-security-contributions-for-workers-coming-to-the-uk-from-the-eea-or-switzerland

14 June 2021

HMRC have published a Synthesised Text of the 2013 Albania-UK Double Taxation Agreement as modified by the OECD Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (the “Multilateral Convention”).

https://www.gov.uk/government/publications/albania-tax-treaties

Starting 1 July 2021

New EU-wide VAT e-commerce rules

From 1 July 2021, the VAT rules on cross-border business-to-consumer (B2C) e-commerce activities changed. The main changes are the following:

·         Online sellers, including online marketplaces/platforms, can register in one EU Member State. This will be valid for the declaration and payment of VAT on all distance sales of goods and cross-border supplies of services to customers within the EU.

·         Below a new EU-wide threshold of €10,000, supplies of telecommunications, broadcasting and electronic services and distance sales of goods within the EU may remain subject to VAT in the Member State where the taxable person is established.

·         Special provisions are introduced whereby online marketplaces/platforms facilitating supplies of goods are deemed for VAT purposes to have received and supplied the goods themselves. In addition, new record keeping requirements are introduced for online marketplaces/platforms.

·         The VAT exemption at importation for small consignments of a value up to €22 has been removed, so all goods imported into the EU are now subject to VAT. An Import One-Stop Shop (“IOSS”) has been created to simplify the declaration and payment of VAT. Simplification measures for distance sales of imported goods in consignments not exceeding €150 will be introduced, in case the IOSS is not used.

See https://ec.europa.eu/taxation_customs/business/vat/vat-e-commerce_en

28 June 2021

HMRC guidance on how to report and pay VAT due on the distance sales of goods from Northern Ireland to consumers in the EU using the One Stop Shop (OSS) Union scheme. https://www.gov.uk/guidance/check-how-to-report-and-pay-vat-on-distance-sales-of-goods-from-northern-ireland-to-the-eu

28 June 2021

HMRC guidance: If you're registered for the VAT Import One Stop Shop (IOSS) in the EU and sell eligible low value goods into Northern Ireland, how to tell HMRC your VAT IOSS registration number. https://www.gov.uk/guidance/tell-hmrc-youre-registered-for-the-vat-import-one-stop-shop-in-the-eu

1 July 2021

HMRC guidance: Register to report and pay VAT on distance sales of goods from Northern Ireland to the EU: How to register for the One Stop Shop (OSS) Union scheme to report and pay VAT due on distance sales of goods from Northern Ireland to consumers in the EU. https://www.gov.uk/guidance/register-to-report-and-pay-vat-on-distance-sales-of-goods-from-northern-ireland-to-the-eu

Effective 1 July 2021

UK Regulations: SI 2021/770 The Finance Act 2021, Section 95 and Schedule 18 (Distance Selling: Northern Ireland) (Appointed Day No. 1 and Transitory Provision) Regulations 2021

These Regulations bring into force the bulk of the provisions in Schedule 18 to the Finance Act 2021 related to VAT and distance selling. Those provisions implement Council Directive (EU) 2017/2455, so far as relevant to the UK’s obligations under the Protocol on Ireland/Northern Ireland in the UK/EU Withdrawal Agreement.

1 July 2021

Revenue and Customs Brief 10 (2021): repayment of VAT to overseas businesses not established in the EU and not VAT registered in the UK

This applies to overseas businesses (not established in the EU), which were required to submit their application for refunds the prescribed year 1 July 2019 to 30 June 2020, together with the certificate of status, on or before 31 December 2020.

The deadline had already been extended to 30 June 2021, but businesses are still experiencing difficulties largely due to measures taken in response to coronavirus (COVID-19). Therefore, HMRC is allowing overseas businesses a further 6 months to submit a valid certificate. This means the deadline is now 31 December 2021.

https://www.gov.uk/government/publications/revenue-and-customs-brief-10-2021-repayment-of-vat-to-overseas-businesses-not-established-in-the-eu-and-not-vat-registered-in-the-uk

4 June 2021

Notice 723A (Refunds of UK VAT for non-UK businesses or EU VAT for UK businesses) has been updated. Information about the rules for claiming VAT has been added to section 3.2 and section 4 has been updated with information about refunds for EU businesses incurred on or before 31 December 2020.

https://www.gov.uk/guidance/refunds-of-uk-vat-for-non-uk-businesses-or-eu-vat-for-uk-businesses

Effective 1 July 2021

UK Regulations: SI 2021/697 The Taxation (Cross-border Trade) (Miscellaneous Amendments) (EU Exit) Regulations 2021:

Various transitional relaxations following Brexit, which were due to end on 30 June 2021, have been extended to 31 December 2021.

When goods are exported from the UK, and export declaration must be made or treated as made. Boasting goods via Royal Mail counts as an export declaration provided their value does not exceed a specified limit. These Regulations also increased that limit from £900 to £1000.

https://www.legislation.gov.uk/uksi/2021/697/contents/made

Effective 1 August 2021

UK Regulations: SI 2021/714 (amended by SI 2021/779) and SI 2021/715:

These Regulations make amendments to VAT legislation to address errors and omissions identified as a result of a review of the EU exit legislation.