TMT Tax Talks The latest tax updates to the Technology, Media & Telecommunications industry February 2022 - Deloitte
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TMT Tax Talks The latest tax updates to the Technology, Media & Telecommunications industry February 2022
Welcome to the third edition of TMT Tax Talks, the latest tax updates bespoke to the
Technology, Media & Telecommunications industry, with a key focus on:
• Irish Tax Updates
• Global Tax Updates
• Events & Industry News
The first two editions of our newsletter were released at the end of last year, at a pivotal time in
Ireland and, indeed, the global tax landscape. In that period, we had the announcement that
Ireland would sign up to the OECD international tax agreement as well as Ireland’s Budget and
Finance Act 2021 covering DAC7 rules, the interest limitation rules, the digital games credit and
various other Irish tax updates. It was also a period of huge change in the global tax landscape as
Pillar 1 and Pillar 2 continued to gain momentum across the world. Since then, we have seen the
publication of the G20/OECD inclusive framework on BEPS’ Global Anti-Base Erosion Model
Rules (Pillar Two) and a draft directive to implement the OECD inclusive framework model rules
in a coherent and consistent way across EU member states, which we discuss below as well as
other Irish and Global updates.
If you have any questions relating to the topics discussed, please reach out to myself or one of Louise Kelly
the team. Partner, International Tax
© 2021 Deloitte Ireland LLP. All rights reserved. TMT Tax Talks 2
Irish Updates © 2021 Deloitte Ireland LLP. All rights reserved. TMT Tax Talks 3
Irish Updates
Irish Updates
Finance Act 2021 DAC7
Finance Act 2021 was signed into law on Finance Act 2021 transposed DAC7, the EU Directive regarding mandatory automatic
21 December 2021. exchange of information by platform operators for tax purposes, into Irish law. The first
reporting deadline is 31 January 2024 in relation to the calendar year ended 31
The full text of the Finance Act can be December 2023.
found on the Oireachtas here: Finance
Act 2021. We held a roundtable discussion on 24 January 2022 to discuss the practical
implications of the reporting requirement on impacted companies.
Finance Act 2021 transposed a number
of key tax include the introduction of the This area will continue to evolve given the transposition of the directive across EU
digital games tax credit, interest Member States and guidance/regulations to be issued on the Irish legislation. We have
limitation rules,,,DAC7, reverse hybrid been gathering feedback, both through the session and discussions with clients/other
rules. Transfer pricing changes and other member firms and we will ensure that all feedback provided will be shared with
technical amendments were also Revenue as we engage with them on this topic.
included.
We will be arranging another roundtable to share perspectives in due course and
For in-depth perspectives from Deloitte please let us know if you would like to be included in same.
on the measures introduced , visit our
page here: Deloitte perspectives.
© 2021 Deloitte Ireland LLP. All rights reserved. TMT Tax Talks 4
Irish Updates
Employment Taxes
• Extension of COVID concessions: Revenue have recently confirmed the extension of a number of
employment tax concessions which were introduced as a result of the pandemic. A full summary of
the relevant concessions can be seen on our webpage here. It should be noted that most of the tax
concessions which were introduced for expatriates expired in December 2020 and have not been
renewed.
• Revenue guidance regarding temporary assignees/business visitors to Ireland: In December 2021,
Revenue issued new guidance with respect to non-Irish employments exercised in the state with
effect from 1 January 2020, which incorporates two changes to the previous guidance. The new
guidance clarifies the position with respect to employer payroll tax obligations where there is a
recharge of costs to an Irish permanent establishment of the foreign employer versus where there is
a recharge of costs to an entity in Ireland which is not a permanent establishment of the foreign
employer. The second change tightens the rules in relation to employees visiting Ireland from
countries with which Ireland has a double taxation agreement and who have greater than 30
workdays and not more than 60 workdays in Ireland. You can view our full commentary and analysis
in this regard here.
• Share scheme reporting requirements: As a reminder, the deadline for the 2021 employer share
scheme reporting obligation is 31 March 2022. Further information can be found here.
© 2021 Deloitte Ireland LLP. All rights reserved. TMT Tax Talks 5
Global Updates © 2021 Deloitte Ireland LLP. All rights reserved. TMT Tax Talks 6
Global Updates
Pillar Two global minimum tax model rules
Further to the publication on 20 December 2021 of the G20/OECD In terms of next steps, member states will need to unanimously agree the text of the directive
inclusive framework on BEPS’ Global Anti-Base Erosion Model Rules and adopt the directive in the Council of the EU under the special legislative procedure. The
(Pillar Two) (“OECD inclusive framework model rules”) designed to European Parliament and European Economic and Social Committee also will need to be
ensure a global minimum level of taxation for multinational groups consulted and give their opinion.
(by reference to a minimum effective tax rate of 15%), the European
Commission (EU Commission) proposed on 22 December 2021 a The French Presidency of the Council of the EU is aiming for an agreement by June 2022 at the
draft directive to implement the OECD inclusive framework model latest and ideally even earlier, with a view to the directive applying as from 1 January 2023. The
rules in a coherent and consistent way across EU member states. timing will be challenging for member states who must transpose the directive into domestic
law.
More information can be found here. It is important to note that EU members of the G20/OECD Inclusive Framework on BEPS already
are supporting the global agreement that the Commission proposal is implementing. Cyprus is
the only EU member state that is not a member of the inclusive framework and as such has not
Following on from this announcement, a webcast was held on 10 formally committed to the agreement; however, the EU Commission is expecting Cyprus to
January 2022 to provide an update on Model Rules For Global support the directive.
Minimum Tax (Pillar Two). This is available to listen back on
demand. In 2022, the EU Commission will put forward a transparency proposal linked to this one,
requiring certain large groups to publish their effective tax rates leveraging on the calculations
The session covered: performed under the directive implementing the OECD inclusive framework model rules.
• Model rules to define the scope, mechanics and administration
of the income inclusion rule and undertaxed payment rule, and We will be hosting an event on Pillar Two in March 2022, please contact lokelly@deloitte.ie or
the associated commentary. one of the team if you would like to be included on the invite to same.
• Model treaty to give effect to the subject to tax rule.
• Next steps.
© 2021 Deloitte Ireland LLP. All rights reserved. TMT Tax Talks 7
Global Updates
Pillar Two/US Interaction Update and Pillar One
Pillar Two/US interaction Pillar One
As part of the ongoing work of the OECD/G20 Inclusive Framework on
Following the release by the OECD of Pillar Two model rules in December, BEPS to implement the Two-Pillar Solution to Address the Tax
on 3 February 2022, our colleagues in Deloitte US hosted a webcast to Challenges Arising from the Digitalisation of the Economy, the OECD
discuss how US businesses with international operations will be impacted launched a public consultation seeking comments on the Draft Rules
by the global minimum tax of Pillar Two. In the session (which is available to for Nexus and Revenue Sourcing under Pillar One Amount A.
listen back here: US webcast re P2), the team discusses:
This public consultation document, issued on 4 February 2022,
• Operation of the income inclusion and undertaxed payment rules contains the first building blocks under Pillar One for which public
• Calculation considerations related to the minimum tax input will be sought, relating to nexus and revenue sourcing.
• Interaction with the US tax regime
• Participants will define how the OECD Pillar Two rules could affect their The document entitled "Pillar One – Amount A: Draft Model Rules for
business and the actions to take to prepare for the coming changes. Nexus and Revenue Sourcing” can be found here.
The slides for the session are available below:
© 2021 Deloitte Ireland LLP. All rights reserved. TMT Tax Talks 8
Global Updates
ATAD III
• The European Commission has published a draft directive setting out rules to prevent the misuse of shell companies for tax purposes.
• In summary (subject to finalisation of the directive), these rules would apply to EU companies that are perceived to be at risk of lacking a minimum level of
operational substance. Specifically, if each of three gateways are crossed, a group will be required to report information regarding whether it meets the
minimum substance requirements, and, where these substance requirements are not met, various tax benefits will be denied.
• A consultation is underway and we will be working with our European colleagues to feed into a European wide response being collated by our European
colleagues currently.
• While the Directive is not yet final, and requires unanimous approval within the EU, the proposed commencement date is 1 January 2024 and certain elements
of the rules include a two-year ‘look back’ period.
• It appears that the composition of employees/directors in companies with predominantly
passive income, and the ability to provide documentary proof of decision making and risk
management will be key.
• The proposals refer to certain types of passive income that may bring a number of companies
within scope – e.g. income from immovable property, leasing, dividends, royalties or interest.
• There is also an exchange of information element to the directive whereby all the information
on in scope entities would be exchanged automatically between EU member states’ tax
authorities, regardless of whether or not the entities were able to benefit from exemption.
• If you would like assistance or have questions regarding reviewing a group’s structure in view
of potential further scrutiny on lower substance EU entities with material transactions, please
let us know.
• More information can be found Deloitte Tax Alert, and the draft directive is here.
© 2021 Deloitte Ireland LLP. All rights reserved. TMT Tax Talks 9
Global Updates
UAE Corporation Tax
• On 31 January 2022, the Ministry of Finance announced that the United Arab Emirates (UAE) will introduce a
federal Corporate Tax on business profits that will be effective for financial years starting on or after 1 June
2023.
• The UAE Corporate Tax regime has been designed to incorporate best practices globally and minimize the
compliance burden on businesses. Corporate Tax will be payable on the profits of UAE businesses as reported
in their financial statements prepared in accordance with international accounting standards, with minimal
exceptions and adjustments.
• Whilst the law has not yet been issued, the UAE Federal Tax Authority has publicly communicated the key
design principle and policy choices of the new regime, which we have summarised in this alert.
Public Consultation on VAT Rules
A public consultation on VAT rules in the digital age has been launched by the European Commission in advance of
a new legislative package due later this year. This legislation will cover digital reporting and e-invoicing
requirements for businesses across the EU, new rules for the platform economy, and a single registration for
companies in the EU. These measures will aim to reduce the administrative burdens for businesses and also help
fight VAT fraud. The consultation deadline is 15 April 2022.
© 2021 Deloitte Ireland LLP. All rights reserved. TMT Tax Talks 10Global Updates
Indirect Tax: EU-wide changes to the Intrastat reporting since January 2022
Since 1 January 2022, significant changes were New Combined Nomenclature 2022
implemented in the Intrastat reporting system, which will
be mandatory in all EU Member States in accordance A new version of the Combined Nomenclature (CN) was published by the European
with the requirements of the modernisation of the ESS Commission on 12 October 2021 and entered into force as of 1 January 2022
(European Statistical System). (Commission Implementing Regulation (EU) 2021/1832).
New Nature of Transaction codes in 2022 HS, CN and TARIC updates
In accordance with Commission Implementing Regulation The HS, determining product classification codes up to a 6-digit level, is updated
(EU) 2020/1197 (see annex ’part C’) as of 1 January 2022, every five to six years. In comparison with the current (2017) version of the HS
all EU Member States are obliged to apply new Nature of nomenclature, under the 2022 version, 351 amendments are made, including the
Transaction codes in their Intrastat reports for both deletion of several HS codes and the introduction of new ones. Furthermore,
dispatches and arrivals, based on the 2-digit reporting. several amendments relate to the description of the goods or to the explanatory
notes, without modifying the codes themselves.
Two additional fields for 'Dispatches' flow of goods
The CN, determining product classification codes at an 8-digit level, will reflect the
All EU Member States are obliged to introduce HS changes as mentioned above. Following the update to HS, and several additional
completion of two mandatory fields in the Intrastat changes at EU-level, 1,057 new CN codes have been introduced.
return for dispatches:
The TARIC, determining product classification codes at 10-digit level will reflect all
- VAT ID number of the partner/customer the aforementioned changes along with several further adaptations, leading to the
- Country of origin introduction of 1,607 new TARIC codes.
© 2021 Deloitte Ireland LLP. All rights reserved. TMT Tax Talks 11Global Updates
Employment Taxes
• Social security - no impact position: In light of the ongoing COVID-19 pandemic, the social security
authorities of all EEA countries and Switzerland have decided to extend the “no-impact” position in
view of determining the applicable social security legislation up until 30 June 2022. This means that
changes in working patterns as a result of COVID-19, such as increased time spent working in a
country other than the country of employment, shall not impact where the individual is liable to
social security. HMRC have announced that the UK will also extend their related measures to 30
June 2022.
• China’s preferred individual income tax policies extended: On 31 December 2021, China extended
several preferential individual income tax (IIT) policies. The preferential taxing method for qualifying
annual bonuses and non-taxable benefits in kind (BIK) for foreign employees have been extended to
31 December 2023. The preferential treatment of income from equity incentive plans of listed
companies has been extended to 31 December 2022.
• Korea extends period of flat income-tax rate for foreign employees to 2023: Under this guidance,
foreigners can elect a flat income-tax rate (19%) as an alternative to progressive income-tax rates
(from 6% to 45%) when calculating individual income-tax liability on earned income. The application
of the flat income tax rate election is limited to a maximum of five years from the start date of
Korean employment. Election for the flat income tax rate means that other tax deductions or
credits cannot be claimed.
• Austria’s proposals on cryptocurrencies: Austria introduced a draft “eco-social” tax reform bill which
contains specific proposals on the taxation of cryptocurrencies for individuals. Under the proposals,
cryptocurrencies would be taxed similarly to capital assets in regard to capital income and gains.
© 2021 Deloitte Ireland LLP. All rights reserved. TMT Tax Talks 12Events & Industry News © 2021 Deloitte Ireland LLP. All rights reserved. TMT Tax Talks 13
Events & Industry News
Events
A Look Back Upcoming
Pillar 2 and US impact: On 3 February, our US
Indirect Tax - ITX Directors’ Academy: We will be hosting the next instalment of our
colleagues hosted a webcast to discuss how US
ITX Directors’ Academy on 9 March, focusing on the interaction between VAT, customs
businesses with international operations will be
and transfer pricing. If you are interested in attending this event, but have not yet
impacted by the global minimum tax of Pillar Two.
received an invite, please contact Vincent McCullagh.
This is available to listen back here: US re Pillar 2).
Various Roundtable events: Date tbc – we will be holding various Roundtable events
Pillar 1 and Pillar 2: On 10 January, there was a
on hot topics. The next event, on Pillar Two, will be held in March 2022. Please let one
webinar held to update on the negotiations and
of the team know if you would like to attend this session or if there is any topic you
remaining political issues. It is available to stream
would like to be discussed at one of these events.
here: January Webinar re P1/P2.
US Tax Policy: On 9 December, there was a webinar on
proposed US tax changes and their impact. It is
available to stream here: US Tax Policy.
© 2021 Deloitte Ireland LLP. All rights reserved. TMT Tax Talks 14Events & Industry News Industry News A CEO and Chief Economist’s Perspective: Technology and the Global Economy See a link to an event held in December hosted by Richard Houston, Senior Partner and Chief Executive, Deloitte NSE where he speaks about the role of technology, culture, and skills in innovation but also the role of alliances and partnerships. Technoverse A reminder to journey into the Technoverse - Deloitte’s forum dedicated to the future of the European technology sector. Within the Technoverse, Deloitte’s global and European TMT experts share their thoughts, providing the latest insights and ideas, and providing observations on what the future of the European technology sector may look like. This includes bringing four (fictional but entirely possible!) futures to life. © 2021 Deloitte Ireland LLP. All rights reserved. TMT Tax Talks 15
Our Team
Louise Kelly Caroline O’Driscoll Declan Butler
Partner Partner Partner
International Tax International Tax International Tax
lokelly@deloitte.ie caodriscoll@deloitte.ie debutler@deloitte.ie
Ronan Ferry Lorraine Griffin
Partner Partner
Head of TMC Head of Tax
rferry@deloitte.ie lorgriffin@deloitte.ie
© 2021 Deloitte Ireland LLP. All rights reserved. TMT Tax Talks 16Our Team
Vincent McCullagh Karen Frawley Daryl Hanberry
Partner Partner Partner
Head of Indirect Tax International Tax Head of GES and
vmccullagh@deloitte.ie krawley@deloitte.ie Head of TMT
dhanberry@deloitte.ie
Kevin Norton Marian Kennedy
Partner Director
Head of Transfer Pricing International Tax
kevinnorton@deloitte.ie makennedy@deloitte.ie
© 2021 Deloitte Ireland LLP. All rights reserved. TMT Tax Talks 17www.deloitte.ie/tax Important notice At Deloitte, we make an impact that matters for our clients, our people, our profession, and in the wider society by delivering the solutions and insights they need to address their most complex business challenges. As the largest global professional services and consulting network, with over 312,000 professionals in more than 150 countries, we bring world-class capabilities and high-quality services to our clients. In Ireland, Deloitte has over 3,000 people providing audit, tax, consulting, and corporate finance services to public and private clients spanning multiple industries. Our people have the leadership capabilities, experience and insight to collaborate with clients so they can move forward with confidence. This document has been prepared by Deloitte Ireland LLP for the sole purpose of enabling the parties to whom it is addressed to evaluate the capabilities of Deloitte Ireland LLP to supply the proposed services. This document is not an offer and is not intended to be contractually binding. Should this proposal be acceptable to you, and following the conclusion of our internal acceptance procedures, we would be pleased to discuss terms and conditions with you prior to our appointment and no reliance may be placed for any purposes whatsoever on the contents of this document. Deloitte Ireland LLP is a limited liability partnership registered in Northern Ireland with registered number NC001499 and its registered office at 27-45 Great Victoria Street, Lincoln Building, Belfast, BT2 7SL, Northern Ireland. Deloitte Ireland LLP is the Ireland affiliate of Deloitte NSE LLP, a member firm of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”). DTTL and each of its member firms are legally separate and independent entities. DTTL and Deloitte NSE LLP do not provide services to clients. Please see www.deloitte.com/about to learn more about our global network of member firms. © 2021 Deloitte Ireland LLP. All rights reserved.
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