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This week in tax: Royal Dutch Shell overhauls dual structure

Royal Dutch Shell abandoned its dual structure in favour of moving its tax base from the Netherlands back to the UK. The company has run on a dual structure for the past 16 years.

Shell plans to end its dual structure and move its chief executive back to the UK, but that’s not all. Not only is Royal Dutch Shell moving its tax base back to the UK, the oil and gas company is changing its household brand name to just Shell after 114 years of operating with the same name.

Shell was considering this structural change for more than a year. The case for moving to the UK was that the company would have a much simpler structure reducing complexity for mergers and acquisitions (M&A).

The UK government has taken the decision as a sign of ‘confidence’ in its economic strategy. The Johnson government has established a 130% ‘super-deduction’ for corporation tax. This may be the biggest corporate tax giveaway in British history.

Meanwhile, the oil and gas sector can expect a higher tax compliance burden in the long-term because carbon taxes will spring up in more countries following the UN’s 26th Climate Conference (COP26).

This is why ITR has launched its climate change hub bringing together a selection of features and news stories on the most important tax trends in environmental policy. Watch this space for updates.

Taxpayers need a clear tax framework for crypto-assets

Investors in cryptocurrencies and other digital assets such as NFTs need a tax framework with clear rules and definitions in order to get the certainty they need to do business. Tax authorities have other ideas.

Governments around the world are considering how to tax cryptocurrencies and other crypto-assets. Many governments have opted to take a hard line on crypto-assets over concerns of tax evasion and money laundering. However, the tax implications of crypto-assets have not been fully explored.

A comprehensive tax framework for crypto-assets would improve certainty for investors, but there may be practical issues related to platforms and the growth of non-fungible tokens (NFTs) still need to be addressed by regulators.

This was the topic of a discussion at The Future of Tax conference held by Hansuke Consulting. “Countries have different approaches to taxing crypto-assets and virtual currencies. We have been looking at the treatment under a variety of taxes: income tax, VAT, property taxes,” said Julien Jarrige, advisor to the director for tax policy at the OECD, asked the audience.

In October 2020, the OECD published a report aimed at assessing the tax treatments and emerging tax policy issues related to virtual currencies. The study noted that policymakers failed to consider the full implications of crypto-assets. This is why G20 leaders called on international organisations for a more detailed assessment of risks.

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European businesses continue to grapple with the withholding tax impact on dividends

Taxpayers are facing difficult questions about withholding taxes on investment portfolios. This is partly because of a lack of much needed digitalisation.

Withholding taxes across Europe continue to complicate matters for companies paying out dividends. However, digitalising withholding tax systems could be the answer to part of the problem. The Future of Tax conference held by Hansuke Consulting took an in-depth look at this policy area.

Speakers at the conference highlighted the Allianzgi-Fonds Aevn vs Centre for Administrative Arbitration (C-545/19) case to illustrate how the return on portfolio dividends can be compromised by withholding taxes.

Portuguese companies paid dividends to Allianzgi-Fonds Aevn – a German undertakings for collective investment in transferable securities (UCITS). Depending on the location of a UCITS, Portugal will tax the dividend income differently.

For instance, if the UCITS is a tax resident, then it would be subject to quarterly stamp duty, even for dividends that have not yet been distributed. The dividends would not face corporate income tax or withholding tax but were subject to tax when distributed.

If the UCITS is a non-tax resident and if it did not pay enough corporate income tax in the resident jurisdiction, it would be exempt from the withholding tax.

In the Allianzgi-Fonds Aevn case, dividends distributed to the company were subject to withholding tax in Portugal due to the German UCITS being exempt from corporate income tax.

Read the full article here

Next week in ITR

ITR will be returning to the topic of transfer pricing principles and documentation for financial services following the BEPS project. The future of the arm’s-length principle is very much under question since the G20 gave its support for the OECD’s two-pillar solution.

The US may be about to approve the Build Back Better bill to revise tax legislation and introduce a minimum corporate tax rate on book income. There will be more updates on the state of play in fiscal policy, but particularly on how companies can stay ahead of changes in the tax landscape.

Readers can expect plenty more next week. Don’t miss out on the key developments. Sign up for a free trial to ITR.

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