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Find in our current newsletter the latest developments on Swiss and international corporate, indirect tax and transfer pricing topics.
Find here an overview of selected Corporate Tax developments during Q3 2023. The provided overview includes both national and international topics such as BEPS 2.0, current EU tax developments, developments regarding double tax treaties, national legislation as well as current Swiss case law. Stay ahead with our insightful Corporate Tax updates.
Enclosed you will find a selection of the Swiss Federal Administrative Court (SFAC) and Swiss Federal Court (SFC) decisions, that may be of interest to you:
Find here an overview of selected Indirect Tax developments during Q3 2023. The provided overview includes development on Swiss and EU level as well as pharma regulatory insights. Stay ahead with our insightful Indirect Tax updates.
Special considerations must be taken into account, among other things, if services are subject to both the previous and the new VAT rate due to the period of their provision, in the case of partial payments and invoices, in the case of advance payments and invoices, and also in the case of services subject to acquisition tax.
In the EU, we are currently witnessing significant developments in the ESG (Environmental, Social, Governance) tax landscape. New levies are constantly being introduced, both small and large, which require our attention. These include among other plastic packaging taxes, sugar taxes, and the extended producer responsibility. All of these topics fall within the realm of ESG and are becoming increasingly important.
On 17 August 2023, the European Commission adopted the Implementing Regulation for the Carbon Border Adjustment Mechanism (CBAM). The approved Implementing Regulation and accompanying guidance:
The CBAM was announced as part of the European Commission’s ‘Fit for 55’ package. This initiative aims to reduce net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels. The CBAM is designed to contribute to this objective and prevent from a carbon leakage. Practically speaking, the CBAM will be a tax on the importation of carbon-intensive products from outside the European Union. In summary, the CBAM will likely affect businesses in three ways:
Consequently, if you are active in the cement, iron, steel, aluminium, fertiliser, electricity or hydrogen industries (or in the value chain of these products), you should begin to assess how CBAM will impact you. Whilst you may not have a direct reporting obligation, you should expect to receive information requests from those impacted.
On 8 December 2022 the European (EU) Commission released its “VAT in the Digital Age (ViDA)” package, which is a set of proposals for new measures aiming to tackle the challenges of the digitization of the economy and to create a more resilient system against VAT fraud. The proposal deals with following main topics:
The ViDA initiative is an ambitious package that will result in significant changes and will have a major impact on systems and processes for a large number of businesses. However the proposals are yet to go through the EU’s legislative process and will require the unanimous approval of all EU Member States as well as implementation in national legislations. Therefore, it remains to be seen whether the implementation of all proposed measures will be possible within the planned timeframe.
Pharmaceutical companies selling drugs listed on the Speciality List (SL) in Switzerland have the opportunity to gain a valuable VAT benefit that could significantly enhance their financial standing. The reason for this opportunity is a recent shift in the approach of health and/or disability insurers regarding the rebates required under Swiss law (KVV Article 71a).
Previously, these rebates were usually issued with VAT on the credit notes, but recently, many insurers have requested the credit notes to be issued without VAT, to avoid any VAT risk on their side.
This change implies that pharmaceutical companies may have inadvertently VAT on these rebates in the past that can be claimed back. The good news is that such overpaid VAT amounts can be reclaimed from the Swiss VAT authorities, provided that a VAT ruling confirming this option is in place. We've been instrumental in assisting numerous pharmaceutical clients in securing these rulings, enabling them to recoup substantial VAT sums spanning the past five years.
The Clinical Trials Information System (CTIS) is a recently established database that plays a pivotal role in the newly implemented clinical trials regulation (CTR) in the European Union. CTIS serves as the central platform for the submission and evaluation of clinical trial data within the EU. Starting from its go-live date on January 31, 2023, the utilization of CTIS is mandatory for all new clinical trial applications in the EU under the new CTR. Furthermore, all existing trials previously approved under the repealed clinical trials directive are scheduled for transition to CTIS by the conclusion of the transition period in 2025.
One of the features of CTIS is its accessibility to the public, which enhances the transparency of clinical trials conducted in the EU. This transparency extends to a variety of aspects, including trial locations, participant and investigator arrangements, as well as the documentation of compliance with Good Manufacturing Practice (GMP) standards. This heightened transparency has possible implications for the supply chain of clinical trials, notably in the context of indirect taxation and the distribution of Investigative Medicinal Products (IMPs) from a pharma regulatory perspective. Failure to comply to the regulations of the EU/EEA can lead to supply chain disruptions and the recall of materials utilized in clinical trials.
Additionally, recent changes in the regulatory landscape pertaining to pharmaceuticals within different EU/EEA countries have introduced a potential critical business risk for non-EU/EEA pharmaceutical companies engaged in the manufacture, sale, and storage of finished drugs, active pharmaceutical ingredients (API), and investigational medicinal products (IMPs) destined for Clinical Trials in the EU.
For instance, certain EU countries, including Germany, Sweden, Denmark, Austria, Cyprus, Belgium, the Netherlands, and others, have enacted or revised legislation that necessitates non-EU/EEA pharmaceutical companies to possess an EU/EEA-based license for the importation or distribution of their products within the EU. Companies outside the EU/EEA will not be granted such licenses. Consequently, pharmaceutical companies based in non-EU/EEA regions, such as Switzerland, may face a supply chain disruption in the European Union as a result of these regulatory developments. PwC has implemented and pressure tested several solutions in that regard that we would be happy to discuss with you.
Find here an overview of selected news in the field of Transfer Pricing.
The OECD on 11 October 2023 released a package of guidance in relation to Amount A of Pillar One: the text of a consensus-based Multilateral Convention (MLC) and accompanying explanatory statement, an Understanding on the Application of Certainty for Amount A of Pillar One (UAC), and an update to the economic impact assessment of Pillar One. Notably absent from the package is any further guidance on Amount B (i.e., transfer pricing for routine distribution and marketing transactions), which the Inclusive Framework (IF) continues to work on, post-consultation, to provide final guidance by the early part of 2024.
The 140 IF countries have agreed to the text of the MLC for release to the public, but there is not yet a formal opportunity to sign. While the MLC demonstrates continuity in many key technical areas such as revenue sourcing, nexus, and tax base, some jurisdictions have presented different views on other items as noted in the footnotes. The US has opened a 60-day public consultation on the MLC, and is especially interested in stakeholder comments around “novel issues identified by a review of the complete text, implementation and administrability issues (including the balance between simplification and technical precision), and technical adjustments to address errors or clarify the operation of the Pillar One MLC provisions.” However, in all likelihood we will not see consultations for the vast majority of other countries, beyond some key stakeholder conversations, nor is it clear that the MLC would be reopened to take into account comments raised in individual countries. New revenue estimates seek to show that developing countries would do better than previously assumed, but that relies on the consistent application by countries of complex formulas. Developing countries are shown to gain most when such revenue gains are expressed as a percentage of current revenues. What is not shown is how much of the total revenue gains from Amount A will go to such countries (e.g., as compared to developed countries).
Cyprus has consented to the Pillar Two Transitional CbCR Safe Harbour. In addition, the Cyprus Parliament recently voted to amend Article 9(1)(d) of the Cyprus Income Tax Law, which grants a tax deduction for expenditures incurred for scientific research and R&D. Finally, the Ministry of Finance announced that the Cyprus-Netherlands tax treaty will be effective 1 January, 2024.
By consenting to the Pillar Two Transitional CbCR Safe Harbour, new and existing Cyprus companies of Pillar Two-eligible US multinational enterprises (MNEs) may not be impacted by the Pillar Two rules until after 2026. Also, eligible Cyprus intangible property (IP) companies should consider the 120% R&D ‘super-deduction,’ as this provision can apply to any type of IP developed via a cost sharing agreement. Finally, Cyprus taxpayers with existing and prospective Dutch entities in their structures should analyze the provisions of the soon-to-be-effective Cyprus-Netherlands tax treaty.