Jersey, Guernsey and the Isle of Man consult on substance requirements for corporate residence in response to EU concerns about the lack of a need for a business to demonstrate economic substance in order to be tax resident. The government acknowledges that the input tax deduction rules for financial services supplied to the EU may have to change in the event of a no deal Brexit, but how it would change is yet to be announced. The draft discussion document published by the OECD’s Working Party 6 in July highlights the divergence of views on the transfer pricing aspects of financial transactions. The CJEU’s decision in the Bulgarian case of TTL EOOD, that irrecoverable default interest charged on income tax not withheld pending treaty relief is unlawful, raises questions about the EU compatibility of a similar rule in the UK.
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