This week in tax: Premier League clubs face tax claims
Premier League football clubs are accused of avoiding paying up to £470 million in UK tax, while Malta is poised to overhaul its unique corporate tax system.
Football clubs have allegedly been avoiding VAT, income tax and national insurance contributions through a tax avoidance scheme, according to a BBC report yesterday, March 30.
The BBC reports that the Premier League avoided tax through ‘dual representation’ contracts, whereby fees paid to agents of players are routed partly through the clubs to halve the tax due on the transactions.
HM Revenue and Customs would receive up to 60% of a fee paid to an agent by a player, whereas this tax liability falls to 30% when the fee is split 50:50 between the player and the club through dual representation.
Dan Neidle, founder of think tank Tax Policy Associates, led the analysis of the Premier League tax arrangements. He estimates that Premier League clubs may have avoided £470 million ($581 million) in UK tax since 2015, £250 million between 2019 and 2021 alone.
Malta set for corporate tax overhaul by 2025
Finance minister Clyde Caruana has reiterated the Maltese government’s commitment to corporate tax reform, according to the Times of Malta on Wednesday, March 29.
Malta should take “the bitter pill now” rather than wait for the EU to impose changes on the country, Caruana told an audience of finance professionals.
Businesses operating in Malta face an income tax rate of 35% (rather than a conventional corporate rate), but taxpayers can claim back up to 30% in tax refunds. This allows many companies to effectively pay 5% or less in tax.
Meanwhile, holding structures registered in Malta are entitled to a full tax exemption, as well as a dividend tax rate of 0%, and the island nation has no withholding tax or stamp duty. But Malta is expected to introduce a minimum corporate tax regime of 15% under OECD commitments.
Caruana announced proposals to reform the corporate tax system in April 2022, but these proposals were shelved in September. Nevertheless, the Maltese government still aims to implement tax reform before 2025.
Companies prepare for new era of tax risks, finds EY survey
Businesses are preparing for even greater tax scrutiny following the COVID-19 pandemic that stalled tax disputes, according to an EY survey published on Wednesday, March 29.
The EY Tax Risk and Controversy Survey found that 51% of company tax leaders expect to face more disputes in the next two years due to greater scrutiny on transfer pricing arrangements.
Almost 40% of tax leaders reported that their companies have appointed a dedicated tax risk or controversy leader, while 80% of respondents said such a role would add significant value to their business.
Nearly 70% of respondents said they expect their focus on tax governance to increase in the coming years, while 86% of tax leaders are looking to be more proactive in preventing tax risks from turning into disputes.
EY teams canvassed the views of more than 2,100 tax and finance leaders across 47 jurisdictions and 20 industry sectors during the fourth quarter of 2022. This was the largest sample in the survey’s 20-year history.
Ireland considers top-up tax over higher headline corporate rate
The Irish government is considering a qualified domestic minimum top-up tax (QDMTT) rather than raise its headline corporate tax rate from 12.5% to 15%.
Ireland may be preparing to retain its low corporate rate by implementing a QDMTT as part of its commitment to pillar two, according to The Irish Times on Tuesday, March 28.
Finance minister Michael McGrath has yet to decide what to recommend to the cabinet, but the Department of Finance is expected to publish a feedback document recommending the top-up tax.
The QDMTT would apply a 15% corporate tax rate to companies with a turnover of more than €750 million ($810 million) a year, while businesses making less than this would continue to pay up to 12.5% in corporate tax.
Ireland has long had a headline corporate rate of 12.5%, making it one of the most competitive tax jurisdictions in the EU. Only Hungary has a lower headline corporate tax rate – at just 9% – while Lithuania is at third place with a rate of 15%.
BNP Paribas, HSBC and Société Générale face Paris tax raids
More than 150 French agents raided the Paris offices of BNP Paribas, HSBC and Société Générale, among other financial institutions, as part of a dividend tax investigation on Tuesday, March 28.
The National Financial Prosecutor (PNF) is investigating the five banks as part of its probe into tax evasion and money laundering, according to Le Monde. Other financial institutions raided include BNP-owned Exane and BPCE investment house Natixis.
The PNF confirmed that the five bank offices were raided as part of its investigation into ‘cum-ex’ dividend stripping. This is a trading scheme whereby banks and investors trade shares of companies around their dividend pay-out day to allow participants to claim tax rebates.
None of the banks have been implicated in tax fraud or money laundering. However, the PNF has said that there could be a compensation request of more than €1 billion ($1.1 billion), including fines and interest.
Next week in ITR
ITR will be following up on key trends such as the implementation of corporate tax in the UAE. We will also provide our analysis of the BEPS project and its implications for intellectual property management. The big question is whether IP teams are working closely enough with their tax counterparts.
Readers can expect these stories and plenty more next week. Don’t miss out on the key developments. Sign up for a free trial to ITR.