Global Implementation of Pillar 2 and Minimum Tax Measures
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Switzerland: Federal Council decides to bring the Pillar 2 income inclusion rule (IIR) into force from 1 January 2025, complementing the Swiss supplementary tax (QDMTT) introduced in 2024.
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Iceland: Launches public consultation on draft bill for introducing Pillar 2 global minimum tax rules in line with EU Directive, including IIR, UTPR, and QDMTT.
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Belgium: Announces that MNE groups subject to Pillar 2 can make advance payments for 2024 from 2 September 2024.
VAT Reforms and Digital Economy Taxation
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Nepal: Updates regulations for Digital Services Tax (DST) and VAT on digital services provided by non-residents, increasing annual transaction thresholds and clarifying covered services.
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Saudi Arabia: Determines criteria for the 15th wave of the integration phase for new E-Invoicing (FATOORA) requirements, set to begin on 1 March 2025.
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Finland: Announces budget for 2025 including various VAT rate changes and adjustments to VAT thresholds for small businesses.
Personal Income Tax Adjustments
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Denmark: Proposes exemption from the 8% labor market contribution for employees under the age of 18 in the draft Finance Act for 2024.
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Kosovo: Amends personal income tax rates, introducing a new progressive structure with rates of 0%, 8%, and 10%.
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Finland: Plans to ease taxation of work, particularly for low and middle-income earners, and introduce an additional earned income deduction for families with children.
Corporate Tax Developments and Incentives
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Brazil: Government considers increasing withholding tax rate on interest on net equity (JCP) from 15% to 20% and temporarily raising social contribution on profits (CSLL) rates.
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Uzbekistan: Introduces incentives to support the catering, hotel, and tourism services sector, including corporate tax rate reductions and VAT refunds.
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Poland: Proposes various VAT amendments, including maintaining reduced rates for certain products and extending the reverse charge mechanism for specific supplies.
Military and Defense-Related Tax Measures
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Ukraine: Parliament revises proposed increase and expansion of the military tax, limiting the increase to 5% for individuals until martial law is abolished.
Insights:
The accelerating implementation of Pillar 2 rules signals a seismic shift in global tax strategy, potentially reducing tax competition but raising sovereignty concerns. Simultaneously, digital economy taxation reforms highlight the growing pains of adapting traditional systems to technological realities.
Personal and corporate tax adjustments reflect a delicate balancing act between fiscal needs and economic stimulation, with potential long-term implications for income inequality and tax arbitrage.
The influence of geopolitical events on tax policy, exemplified by Ukraine’s military tax revisions, suggests a trend towards more volatile, ‘crisis-driven’ taxation globally.
As we move forward, expect rapid digitalization of tax administration, more targeted anti-avoidance measures, and an increased focus on environmental taxes, necessitating a multidisciplinary approach from tax professionals.
