[World Tax News] Germany Approves ‘Global Minimum Corporate Tax’ and More

Editorial Team – [2023] 156 taxmann.com 410 (Article)

World Tax News provides a weekly snippet of tax news from around the globe. Here is a glimpse of the tax happening in the world this week.

1. Germany approves global minimum corporate tax

The German parliament endorsed adopting a global minimum corporate tax, aligning with an international agreement to establish a minimum tax rate of 15% for large companies.

Under this agreement, multinational corporations will be obligated to pay a 15% tax on their global profits, irrespective of the location where these profits are generated.

In 2021, nearly 140 countries reached a consensus on an Organisation for Economic Cooperation and Development (OECD) deal, which they are slated to implement starting next year. This agreement aims to curb the practice of major corporations evading taxes by shifting profits to jurisdictions with lower tax rates.

Source: News dated 10-11-2023

2. UAE releases guide on accounting standards and interaction with corporate tax

The Corporate Tax Guide on Accounting Standards and Interaction with Corporate Tax was released by the UAE Federal Tax Authority (FTA) on 6 November 2023. The guide outlines its purpose and identifies the intended audience as follows:

(a) Purpose of the guide:

This guide provides general guidance on the interaction of Accounting Standards with Corporate Tax. It provides readers with an overview of:

(i) Preparation of Financial Statements;

(ii) The Cash Basis of Accounting;

(iii) The realisation basis of accounting;

(iv) Other adjustments under Article 20(2)(i) of the Corporate Tax Law; and

(v) Adjustments under the transitional rules.

(b) Who should read this guide?

This guide should be read by any Person who is responsible for preparing the Financial Statements of Taxable Persons for Corporate Tax purposes. It is intended to be read in conjunction with the Corporate Tax Law, the implementing decisions and other relevant guidance published by the Federal Tax Authority.

Source: Corporate Tax Guide- CTGACS1

3. Taiwan may impose travel restrictions for directors of companies having unpaid taxes

The Ministry of Finance in Taiwan has recently released a notification regarding potential travel restrictions applicable to directors of companies with unsettled tax obligations, even in instances of company liquidation.

In an example given by the National Taxation Bureau of the Northern Area (NTBNA), MOF, Mr A, a director of Company A, took advantage of the consecutive holidays to arrange a long-awaited trip abroad as the epidemic subsided and borders reopened. To his surprise, as he was going through the departure procedures at the airport, he was restricted from leaving the Republic of China by Customs due to the Company’s unpaid taxes. Mr. A was furious and argued that although he serves as a director of the Company, he is not the chairman, and the Company’s unpaid taxes should not be his concern. He questioned why he was restricted from leaving the ROC.

The Bureau explained that according to Paragraph 3, Article 24 of the Tax Collection Act, if a profit-seeking enterprise owes confirmed tax payments exceeding NT$2,000,000 or owes tax payments exceeding NT$3,000,000 before the conclusion of procedures for administrative remedies and meets the conditions stipulated for “Restriction on Exiting and Lifting of Exit Restrictions on Tax Debtors or Responsible Persons of Profit-Seeking Enterprises with Tax Arrears”, the responsible persons may be restricted from leaving the ROC.

Company A, limited by shares, has accumulated about NT$21.18 million in unpaid profit-seeking enterprise income tax. The Bureau found that the conditions for restricting the responsible persons’ leaving the ROC were met. However, Company A’s registration was nullified by the Ministry of Economic Affairs.

According to Article 24 and Article 26-1 of the Company Act, Company A should undergo liquidation, during which the liquidators should act as the legal representative. If it is deemed necessary to restrict the responsible persons from leaving the country, the liquidators should be the subject of the travel restriction. Upon investigation, it was found that the Company’s articles of incorporation did not specify a liquidator, and the shareholders’ meeting did not pass any resolution to appoint a liquidator. Therefore, according to Paragraph 1, Article 322 of the same law, all directors should act as the liquidators. Mr. A serves as a director of the Company, and to safeguard tax claims, the Bureau has the authority to restrict Mr. A from leaving the ROC.

The Bureau advises that if one holds a position as a director of a company limited by shares, he or she should not ignore the Company’s unpaid taxes simply because the Ministry of Economic Affairs has nullified the Company’s registration. Even if he or she does not serve as the chairman of the board of the Company, he or she could still be subject to travel restrictions due to his/her role as a director, which, according to the law, could entail acting as the liquidator.

Source: Notice for Directors Restricted from Travel Abroad Due to Company’s Tax Debt