COVID-19 Pandemic, Knowledge-Related Economic Activities and European Stock Trading – The Latest News
COVID-19 Pandemic: Greece Allows Input VAT Deduction for Vaccines and Drives Cash Advance Measures
Greece has clarified that input VAT for COVID-19 vaccines, for which a 0% VAT rate applies, can be deducted. Additionally, it has initiated the procedure for the fifth round of the Repayable State Cash Advance Measure and announced a sixth round of the measure for March 2021.
These measures are detailed below.
Deduction of Input VAT for Vaccines subject to 0% rate
Tax authorities have clarified that deduction of input VAT is possible regarding the supply of COVID-19 vaccines that are subject to 0% VAT (see Greece-2, News 24 December 2020). In addition, they have clarified that the 0% VAT rate applies as from 23 December 2020 until 31 December 2022. The tax authorities’ clarifications are available here (as a PDF and in Greek only).
Initiation of the fifth round of the Repayable State Cash Advance Measure
Greece has initiated the procedure for the fifth round of the Repayable State Cash Advance Measure. Specifically, applications may be filed by companies of all economic sectors and legal forms (with the exception of some private businesses), that:
- have their seat or permanent establishment and operate legally in Greece, regardless of their Activity Code Number;
- have been financially affected due to the appearance and spread of COVID-19;
- employed less than 1,000 employees with a dependent employment relationship as at 1 November 2020;
- have not been continuously inactive since 1 July 2019, as shown by the data held in the tax register of the tax authorities or from the filing of VAT returns throughout this period;
- shall maintain and issue accounting records; and
- have not started their operations after 31 October 2020.
The deadline to file applications of interest expires on 15 January 2021. Applications shall be filed at the online platform of tax authorities, called “myBusinessSupport“.
The procedure was initiated by the common decision of the Ministry of Finance and the Ministry of Development that is available here (as a PDF and in Greek only).
Sixth round of the Repayable State Cash Advance Measure in March
The Minister of Finance has announced that a sixth round of the Repayable State Cash Advance Measure is expected to be initiated in March 2021. In addition, he noted that the government is examining the possibility of not requesting the return of the 50% of the amount granted to beneficiaries during the first three rounds of the Repayable State Cash Advance Measure.
Argentina Implements Incentive Regime for Knowledge-Related Economic Activities
The Executive Branch has provided rules aimed to implement the Incentive Regime for Knowledge-Related Economic activities (see Note below). Such rules are as follows:
- prospective beneficiaries of the regime must apply for registration before the Ministry of Productive Development (Ministerio de Desarrollo Productivo). The Ministry is in charge of approving the applications and of keeping an ad hoc registry
- in order to determine the benefits applicable to each beneficiary, the Ministry of Productive Development will issue a registration certificate indicating the promoted activities carried out by the beneficiary as well as their proportion with respect to its overall activities;
- registered beneficiaries must renew their registration every two years by reporting information confirming that they are in compliance with the regime;
- once registered, beneficiaries are granted with the benefits of the regime retroactively as from 1 January 2020;
- the regime provides for a reduction of the income tax liability of the beneficiaries. Such reduction will be determined according to the information contained in the annual tax returns filed by the beneficiaries;
- in addition to other benefits, beneficiaries of the regime may receive a non-transferable credit certificate of 70% of the social contributions effectively paid by the employer in connection with the salaries of employees engaged in the promoted activities. This applies in respect of social contributions established by Laws 19032, 24013, 24241 and 24714. The application of the credit certificates will be made in accordance with the rules to be established by the Tax Administration;
- beneficiaries of the regime that are exporters will not be subject to VAT withholdings or surcharges. The Tax Administration will provide exporters with a special certificate for such purposes, once the registration procedure is completed;
- a 0% export duty rate will apply to the export of services performed in Argentina to be used or exploited abroad, as defined by article 10 of the Customs Code (as amended); and
- beneficiaries with an address or assets located in a low tax or non-cooperative jurisdiction (as defined by the Income Tax Law) will be subject to special audit procedures.
These implementing rules were established by Decree 1034/2020, published in the Official Gazette of 21 December 2020 and in force as from 22 December 2020.
Note: The promotional regime was established by Law 27,506. The regime covers the development, design, creation, production, implementation and adaptation of a wide range of products and services in knowledge-related economic areas (e.g. software, digital and IT services, biotechnology, nanotechnology). Companies qualifying for the regime enjoy various tax benefits.
London lost a chunk of European stock trading last week. What will it lose next?
Banks and brokers did a lot of work to make sure they can continue trading as normal
When the UK’s Brexit deal with the EU expired last week, some €6 billion ($ 7 billion) of daily trading in EU stocks left London overnight to cross the Channel. The question is whether this was a one-off blow or a sign that even larger chunks of the financial sector will disappear.
With financial services largely excluded from the Brexit agreement between London and Brussels, UK exchange operators can no longer provide European clients with trading in EU-registered shares. Companies in the UK capital, such as the London Stock Exchange Group, Cboe and the Aquis Exchange, have activated their EU stock markets on the continent, where almost all EU stock trading currently takes place.
It is easy to overestimate what has happened so far. This is mainly a change in legal designation. UK exchange operators have divisions in places like Paris and Amsterdam for this type of business, but technically e-buying and selling still takes place in the UK data center. (As well as trading on the pan-European exchange Euronext.) The British have lost some of their tax revenues and some pride, but for now the financial district of the country remains intact.
“Banks and brokers did a lot of work to make sure they can continue trading as normal,” said Anish Puaar, an analyst at Rosenblatt Securities in London. “Instead of Cboe London it’s Cboe Amsterdam. That’s about it.”
However, CFOs fear that this may be just the beginning.
“Losing your equities business for European trading, while it’s annoying, and embarrassing, it isn’t actually a huge part of the $60 billion trade surplus that exists today in the UK for financial services,” said Alasdair Haynes, founder and CEO of European stock exchange Aquis Exchange. “The worry is what happens with the next bits? And what are the next bits of the industry that start to move across?”
The UK has two options with big ramifications: officials can try to maintain access to the EU market by keeping UK rules and regulations in strict accordance with the rules of the European bloc. It is hoped that the EU authorities will provide the UK with an “equivalent” and allow its companies to sell financial services on a single market.
Another option is to show courage: the UK can forget about equivalence, abandon easy access to the EU single market and go its own way, making full use of its ability to create its own rules and regulations. But if the UK decides to deviate from EU rules, it could prompt officials in Paris and Frankfurt to step up their efforts to deprive Britain of as much financial services as possible.
Xavier Rolet, a former executive director of the London Stock Exchange, doubts that British politicians will go more ambitiously. For Rolet, a Frenchman who has also been CEO of investment bank Lehman Brothers, the bottom line is that services account for about three-quarters of the UK economy, and Westminster does not have a service agreement with the EU. He says the UK has little leverage.
“It will require a choice to go for broke in terms of regulatory and fiscal recalibration, which means that there will be no hope of maintaining access to EU markets,” he said. “I doubt that UK politicians will make that choice, and, in my view, I think they will be influenced and egged on by UK regulators to maintain equivalency.”
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