The EU Carbon Border Adjustment Mechanism (CBAM) Regulation entered into force on 17 May 2023 and will take effect from 1 October this year with a transitional phase that lasts until the end of 2025.
In preparation for its introduction, on 13 June 2023, the European Commission published a first call for feedback on the rules governing the implementation of the CBAM during its transitional phase.
On 10 May 2023 the Council of the European Union and European Parliament signed the regulation implementing the EU Carbon Border Adjustment Mechanism (CBAM). CBAM will enter into force twenty days after it is published in the Official Journal of the European Union.
Cross-border tax avoidance arrangement disclosure rules implementing OECD Model Mandatory Disclosure Rules referred to as “UK MDR” have come into force in the UK on 28 March 2023. In-scope arrangements entered into on or after this date must be reported to HMRC.
In its efforts to continue to promote fair tax competition and address harmful tax practices, the European Council decided on 14 February 2023 to add the British Virgin Islands, Russia, Costa Rica and the Marshall Islands to the EU list of non-cooperative jurisdictions for tax purposes or “blacklist”. Now is the time for multinational enterprises and investment funds with subsidiaries or investors in these jurisdictions to consider the potential tax implications of this development on their structures.
In November 2022 the UK Government announced a new, temporary 45% levy on “exceptional” receipts generated from the production of wholesale electricity and published a “technical note” on the operation of the levy. Despite heavy criticism of the move by many clean energy market participants, on 20 December 2022 the UK Government confirmed its intention to press ahead with the EGL by publishing a supplementary technical note and draft legislation outlining the details of how the new tax would operate. The EGL has been introduced from 1 January 2023 and will have an impact on existing and potential investors in the UK clean energy market.
Multinational groups are increasingly likely to use voluntary carbon credits as part of their efforts to decarbonize their businesses and achieve their climate goals. There are a number of tax complexities and risks depending on how voluntary carbon credits are going to be acquired and used by companies and further guidance from HMRC would be welcomed, particularly as the market grows and becomes more regulated. Where multinational groups are taking a strategic approach to their offset activity, tax functions should play an active role in design and implementing structured arrangements.
In March 2021, the EU approved new reporting rules in a directive known as DAC7. The directive will require the operators of online platforms for the sale of goods and certain services, to collect, verify and share data on their sellers and their transactions concluded on the online platform. EU member states have until 31 December 2022 to implement DAC7 into national law. Certain platform operators will become a reporting platform and will need to start collecting and verifying data points in compliance with the DAC7 reporting requirements. The collected data points must be reported to the tax authorities of the relevant EU member state annually.
Following the signing of the EUâUK Trade and Cooperation Agreement on 30 December 2020, the UK Government has announced that it will cease to participate in the EU mandatory disclosure regime known as DAC6, for which reporting was due to commence from January 2021. The UK will implement a lighter reporting regime based on the OECD’s Mandatory Disclosure Rules (“MDR”) set out in BEPS Action 12. As a transitional measure with immediate effect, DAC6 reporting will only be required for certain specific arrangements concerning automatic exchange of information and beneficial ownership.
Following a recent announcement of the European Commissionâs proposal for a three-month deferral of reporting deadlines under the new DAC6 mandatory disclosure regime in the EU and UK, the Committee of the Permanent Representatives of the Governments of the Member States to the European Union (COREPER) has now reached an agreement on a revised proposal which could possibly defer the reporting deadline for six months. On the basis that the draft Directive, once approved, may be adopted at the discretion of each member state, it is imperative that businesses do not delay in preparing to meet their existing compliance obligations should reporting dates not be deferred (or not be deferred in all Member States where they operate).