Global Minimum Tax Implementation Accelerates
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Canada: Enacted legislation for 15% Pillar 2 global minimum tax, effective for fiscal years beginning on or after 31 December 2023.
- Latvia: Published law for partial implementation of Pillar 2, requiring ultimate parent entities to select designated filing entities in other jurisdictions.
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Denmark: Amended Minimum Taxation Act to align with OECD model rules, introducing safeguards against circumvention arrangements.
- Lithuania: Adopted order on notification requirements for Pillar 2, detailing procedures for submitting information notices via the tax authority portal.
Novel Approaches to Environmental Taxation
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Denmark: Agreed to introduce world’s first tax on agricultural livestock emissions, starting at DKK 300 per tonne CO2e in 2030, rising to DKK 750 in 2035, with a 60% basic deduction.
Digital Economy Taxation Developments
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Canada: Enacted 3% Digital Services Tax, with flexible implementation date based on OECD Pillar 1 progress.
- Australia: ATO working on implementation of Global and Domestic Minimum Tax, designing returns and systems for first lodgements due by 30 June 2026.
International Tax Treaty Network Expansion
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Armenia-Hong Kong: Signed first income tax treaty, to apply from 1 January/1 April of the year following entry into force.
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Ukraine-Japan: Ratified new tax treaty, replacing 1986 Soviet Union treaty, effective 30 days after exchange of instruments.
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Luxembourg-Moldova: Signed first amending protocol to 2007 tax treaty.
- Kazakhstan-Oman: Authorized signing of first income and capital tax treaty.
Domestic Tax Reform and Relief Measures
- Netherlands: Proposed new system for Box 3 income taxation based on actual returns rather than deemed rates, effective 2027.
- Spain: Extended VAT rate reductions on basic food products until 30 September 2024, with gradual increases thereafter. Increased personal income tax withholding exemption to EUR 15,876.
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Japan: Published regulations for new innovation box regime, offering 30% deduction on qualifying IP income from 1 April 2025 to 31 March 2032.
Insights:
- The accelerated implementation of the Global Minimum Tax across various jurisdictions signals a rapid shift in the international tax landscape. The introduction of safeguards against circumvention (e.g., Denmark) suggests that tax authorities are anticipating potential avoidance strategies, which may lead to more complex compliance requirements for multinational enterprises.
- Denmark’s pioneering livestock emissions tax represents a significant development in environmental taxation, potentially setting a precedent for other countries. This could lead to increased costs for the agricultural sector and may influence global food prices and trade patterns.
- The flexible implementation date of Canada’s Digital Services Tax, contingent on OECD Pillar 1 progress, highlights the delicate balance countries are striking between domestic revenue needs and international cooperation. This approach may be adopted by other countries, creating a complex, evolving landscape for digital businesses.
- The shift towards actual return-based taxation for investment income in the Netherlands and the innovation box regime in Japan demonstrate a trend towards more targeted, economically efficient tax policies. These changes could influence investment behaviors and R&D activities, potentially reshaping competitive landscapes in these countries.
