Greetings and Happy Tuesday! This is Tax Roast, a weekly newsletter that brings you the latest updates and insights from the international tax world from tax experts (and coffee enthusiast) who are walking the tax advisory path.

And do not forget to check out our coffee of the week, because there is no tax news without a good cup of coffee :)

International Tax Update

Cayman / Removal from EU’s AML blacklist

The Government of Cayman announced that the country will be removed from the EU’s list of jurisdictions exhibiting shortfalls in their anti-money laundering and countering the financing of terrorism (AML/CFT) frameworks. The removal will be effective as from 7 February 2024.

Malta / New TP Rules

The Maltese Transfer Pricing Rules (which came into effect on 1 January 2024) have been amended. The amendments specify that any arrangements entered into before 1 January 2024, which have not been materially altered after that date, will be subject to the application of the Transfer Pricing Rules for basis years commencing on or after 1 January 2027 (before, such arrangements were only subject to TP if they were materially altered on or after 1 January 2024). To provide additional guidance, the Maltese tax administration published an update on its website which you can access HERE.

Brazil / Modification of tax credit for investments

Brazil has amended the tax treatment of subsidies for investment by eliminating the possibility of deducting these subsidies from the taxable base of corporate income tax, social contribution on net profits (CSLL) and social contributions. A detailed summary of what these changes mean for taxpayers can be found HERE.

Republic of Korea / 2023 tax law amendments implemented

South Korea has formally implemented the 2023 tax law amendments introduced previously. The two most significant changes are in relation to the requirement to file local and master files and the respective filing deadlines as well as with respect to the Tax Preferential Control Act. A full overview of the relevant measures can be found HERE.

Fun Tax Fact of the Week

Global minimum tax / Pillar 2 bootcamp

In this week’s P2 bootcamp we are continuing our journey through the depths of the Pillar 2 perimeter. After looking into the meaning of a Constituent Entity, this week we focus on those entities which are not within the scope of Pillar 2…so-called Excluded Entities.

First, it is important to note that while Excluded Entities are not within the scope of Pillar 2 (i.e., they are not taken into account to calculate any top-up tax), they must be taken into account to determine whether a MNE meets the EUR 750 million threshold to be within the Pillar 2 rules as a group.

Excluded entities are defined in Articles 1.5.1 and 1.5.2 of the OECD Model Rules and include:

• government entities;
• international organizations;
• non-profit organizations;
• pension funds;
• investment funds that are a UPE; and
• real estate investment vehicles that are a UPE.

It is good to know that in many cases, the above entities wouldn’t be subject to accounting consolidation in any case (but there are exceptions as usual). An entity owned by an excluded entity can also be treated as an excluded entity where at least 85% of the value of an entity is owned (directly or indirectly) by one or more excluded entities (excluding pension services entities), and where substantially all of the entity’s income is dividends or equity gains or losses excluded from the Pillar Two GloBE income or loss calculation.

A five-year election is available to treat an Excluded Entity as a constituent entity so that the general Pillar Two GloBE rules would then apply to it. This could be beneficial in some cases, particularly with regard to the charging mechanism (which is a topic for another issue of this newsletter).

Leadership principles for top managers at Big Multi Inc. 🏢

Rule #4 - Be humorous…

This week’s take on the leadership principles is seriously humorous or humorously serious (or both). This is entirely up to YOU to decide. With the expectations now set…we found an interesting article with two Stanford experts suggesting that HUMOR might be the leadership skill #1.

Their point is: Laughter accelerates feelings of trust, closeness and comfort. When people share a laugh, their brains release certain hormones — endorphins and dopamine — that emulate the feeling of a runner’s high, or a brief state of extreme joy and delight. This chemical reaction in your brain is what makes you feel bonded with others.

You can check out an article discussing this HERE

Tax Roast of the week

Invite the crew for a coffee☕

We never say no to a good cup of coffee! So, if you loved this edition and you would like to support us, you can invite our crew for a cup of coffee here.

Coffee corner

You, also as a coffee enthusiast, probably have heard about the two main types of coffee beans that are in commercial production: robusta and arabica. If you buy a nice and decent  sack of coffee beans in a coffee shop (or at your local grocery shop), on the packageit is typically indicated whether it is purely made of arabica beans or a mix of arabic and robusta beans. Many cases the exact percentage can be found on the package.If you drink instant coffee, your coffee is made of mostly robusta beans. 

So what are the differences?

These coffee beans are naturally different. Arabica is grown at higher altitudes. They have slightly different shapes, robusta beans have a more round shape while arabica beans have a more oval like shape. They have different levels of caffeine, arabica beans have a lower level of caffeine content, roughly half of the one you can find in a robusta bean. 

Their colors are also different when they are still on the coffee plants. 

As they prefer different altitudes and weather conditions they are cultivated in different regions on planet Earth. Arabica beans are more typical in Central and South America while robusta beans can be more typically found in Central and West Africa and South East Asia. 

As they prefer different altitudes and weather conditions and they are cultivated in different regions on planet Earth they have different tastes. As their production depends on altitude and climate, they are not produced equally, roughly 70% of the world's coffee production is arabica. These differences lead also to different prices on the market, where robusta beans are typically cheaper than the arabica ones.

Due to these differences, if you go to a grocery store, you would hardly see pure robusta brands while you can easily find many brands made of 100% arabica. 

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