Oil major Shell paid USD 12.6 billion in corporate income tax and government royalties after recording a profit before tax of USD 30 billion in the year 2021.
On November 22, 2022, the OECD released the latest mutual agreement procedure (MAP) statistics covering 127 tax jurisdictions.
A United Nations committee has approved draft resolution on “Promotion of inclusive and effective international tax cooperation at the United Nations.”
On November 18, 2022, Malta gazetted Transfer Pricing Rules, 2022.
As per the rules, in ascertaining the total income of any company:
- where any amount incurred or due, in the year preceding the year of assessment under any cross-border arrangement to which the transfer pricing rules apply, differs from the arm’s length amount, it shall be deemed that the arm’s length amount was incurred or due as opposed to the actual amount incurred or due; and
- where any amount accrued or derived, in the year preceding the year of assessment under any cross-border arrangement to which the transfer pricing rules apply, differs from the arm’s length amount, it shall be deemed that the arm’s length amount was accrued or derived instead of the actual amount accrued or derived.
Spain has been awarded for taking the shortest time in closing transfer pricing cases under the mutual agreement procedure (MAP) set out in tax treaties.
The 2021 MAP Statistics were presented during the OECD Tax Certainty Day, where tax officials and stakeholders took stock of the tax certainty agenda and discussed ways to further improve dispute prevention and resolution. The MAP Award is given in recognition of efforts by competent authorities in dealing with MAP cases.
The OECD has published the latest annual Corporate Tax Statistics, covering over 160 countries and jurisdictions.
By Rafael Rivera Castillo (Managing Partner, BDO, Panama)
In an August 8 decision, the Panama Supreme Court of Justice declared unconstitutional several sections of the Tax Procedure Code (TPC). These provisions granted special adjudicating powers to private arbitration panels to solve tax disputes between the Directorate General of the Revenue (DGI) and taxpayers, including those related to international tax issues (such as the application of tax treaties and transfer pricing issues).
US accounting and advisory firm Weaver has hired Josh Finfrock as director of the firm’s transfer pricing and international tax team.
The Swiss Federal Council has appointed Tamara Pfammatter as the new Director of the Federal Tax Administration (FTA) with effect from April 1, 2023.
Pfammatter, who will succeed Adrian Hug, is currently an ambassador and a member of management at the State Secretariat for International Finance (SIF). As the Head of the Tax Division, she is responsible for Switzerland’s international tax dossiers and for the multilateral negotiations in the OECD’s project on taxing the global economy.
For over a year prior to her current post, she was deputy divisional head in the Tax Division and divisional head in the Corporate Taxation Policy Division at SIF. From 2009 to 2020, she worked as a project leader in the Tax Policy Division of the FTA.
The Australian government is expanding its tax treaty network to provide improved certainty to taxpayers and guard against tax avoidance practices.
New negotiations are planned with Bulgaria, Colombia, Croatia, Cyprus, Estonia, Latvia, and Lithuania. These countries add to the current program which includes Portugal, Slovenia, Greece, and Luxembourg.
The Independent Commission for the Reform of International Corporate Taxation (ICRICT) is pleased to announce Martín Guzmán as a new Commissioner.
Martín Guzmán served as Argentina’s Minister of Economy between December 2019 and July 2022.
Guzmán advocated for the interests of emerging and developing countries during the OECD/G20 Inclusive Framework negotiations to reform the international tax system that led to the global agreement in October 2021.
Law firm White & Case LLP has roped in Carlos Martinez as a partner in the firm’s Global Tax Practice.
Martinez will be based out of Mexico. Martinez joins White & Case from Creel Abogados, S.C.
Martinez has extensive experience providing tax advice to domestic and multinational companies on corporate transactions. He also provides advice on international taxation, transfer pricing and tax litigation.
White & Case partner Sang I. Ji, Global Head of the Tax Practice, said: “Carlos brings a wealth of experience acting as tax counsel on complex, cross-border deals. Further strengthening our tax capabilities in Mexico through Carlos’s arrival will support the continued growth and development of our corporate practice in this key market.”
The update comes into effect for accounting periods beginning on or after January 1, 2023, for corporation tax purposes.
The revision of the code, the first one since 1997, means that member states will broaden the scope of the tax measures under scrutiny when examining harmful tax practices within the EU.
The Court of Justice of the European Commission annuls the European Commission’s 2015 finding that Luxembourg granted selective tax advantages to Fiat through a transfer pricing ruling, in breach of EU state aid rules.
This year’s report represents 2,468 corporate entities, who paid a combined AUD 68.6 billion in income tax, AUD 11.4 billion or 19.8 percent more than the previous year and the highest since reporting began.
The letter calls upon the Biden administration to withdraw its termination of the tax treaty and promptly consult with Congress on a bipartisan basis to address any concerns with the tax treaty or any other of the United States’ current bilateral tax treaties.
The amount of corporate income taxes paid by Inter IKEA Group decreased to EUR 322 million (EUR 398 million in the 2021 financial year). However, the total tax contribution increased slightly to EUR 1,996 million (EUR 1,916 million in the 2021 financial year).
The paper finds that global corporate profits have grown much faster than global income between 1975 and 2019. “The share of profits in global income has increased by a third over this period, from about 15 percent to close to 20 percent. This increase is due both to the rise of the share of global output originating from corporations and the rise of the capital share of corporate output,” it states.
The Commission has decided to extend the scope of its original investigation to specify further the measure in favour of MJN GibCo, in line with the Court’s indications, and reassess the information submitted by the UK in relation to MJN GibCo 2012 tax ruling.
Under the new regime, taxpayers can still be exempted from tax in respect of the specified foreign-sourced passive income received in Hong Kong if they have a substantial economic presence in Hong Kong.
The manual is intended as a guide to tax administrations and taxpayers for streamlining the bilateral APA process.
The EU tax blacklist now consists of 12 jurisdictions: American Samoa, Anguilla, Bahamas, Fiji, Guam, Palau, Panama, Samoa, Trinidad and Tobago, Turks and Caicos Islands, US Virgin Islands, and Vanuatu.
UK government, on July 20, released draft rules aimed at ensuring multinational enterprises (MNEs) operating within the UK pay a global minimum level of tax.
The draft rules are in line with the agreement on a 2 Pillar solution to reform the international tax framework made by the G20 — Organisation for Economic Co-operation and Development Inclusive Framework on Base Erosion and Profit Shifting (BEPS) last year.
On June 8, 2021 Germany implemented modifications to the Transfer Pricing Legislation in both the Foreign Tax Act (Außensteuergesetz) and the Fiscal Code (Abgabenordnung). Most of the modifications were already proposed with a previous initiative in March 2020 (for further information see Link: Proposed modifications to the German Transfer Pricing Legislation), however, this initiative was excluded from the final legislation passing process. In a subsequent initiative, most of the modifications from the previous initiative were included and proposed in January 2021. This proposal was now finally implemented in June 2021.
The Convention will enter into force on January 1, 2022, for these countries.
The reporting will take place within 12 months of the date of the balance sheet for the financial year in question. The directive sets out the conditions under which a company may defer the disclosure of certain information for a maximum of five years.
Anguilla, Dominica, and Seychelles are now included in the state of play document (Annex II), which covers jurisdictions that do not yet comply with all international tax standards but that have committed to implementing tax good governance principles.
By CA. Akshay Kenkre (Founder and Practice Lead, TransPrice Tax Advisors LLP, India)
The Indian transfer pricing regulations were enacted via the Indian Finance Act 2001 by introducing a separate code under Sections 92 to 92F of the Income- tax Act , 1961 (‘the Act’) read with Income- tax Rules, 1962 (‘the Rule’s) 10A to 10ETHD. The regulations are largely and principally based on OECD guidelines and describe the various transfer pricing methods, requirement for transfer pricing documentation, and contain penal provisions for non-compliance. The Indian regulations deal with intra-group transactions and is applicable from April 1, 2001.
The data underlines the importance of the two-pillar plan being advanced by over 130 members of the OECD/G20 Inclusive Framework on BEPS to reform international taxation rules and ensure that multinational enterprises pay a fair share of tax wherever they operate.
The consultation will run until September 10.
DAC6 Schema Version 1.1 is applicable for all exchanges until July 31, 2021.
Comments must be received by August 16, 2021.
The two-pillar package aims to ensure that large multinational enterprises (MNEs) pay tax where they operate and earn profits, while adding much-needed certainty and stability to the international tax system.
By Muzammal Rasheed (Co-founder, CEO & Head of Practice, WTS Global, Pakistan)
The Federal Government has announced several anti-avoidance tax measures in the Finance Bill 2021, presented as part of its third Budget before the National Assembly. The Government tags this budget as “No New Tax Budget” and emphasizes on the expansion of tax bases. This article outlines some of the anti- avoidance measures of the new tax policy introduced through Finance Bill 2021.
The two-pillar package aims to ensure that large multinational enterprises (MNEs) pay tax where they operate and earn profits, while adding much-needed certainty and stability to the international tax system.
The tax reform package will include a reallocation of taxing rights – where companies pay tax wherever they conduct business – and a global minimum effective tax rate of at least 15 percent to tackle aggressive tax planning and stop the corporate tax “race to the bottom.”
The suspension will continue the beginning of September 2021.
The OECD’s Forum on Harmful Tax Practices (FHTP) has granted the Philippines’ appeal to assess its ROHQ regime as “potentially harmful but not actually harmful” until December 3, 2021, and then have the country’s ROHQ regime status declared as “abolished” by January 1, 2022.
The guidance clarifies the terms and conditions that taxpayers must fulfil to avail MAP, including access to MAP, submitting MAP requests, and the various deadlines, among others.
By Carmen McElwain (Partner, Minter Ellison, Melbourne, Australia)
On 21 May 2021 the High Court of Australia (comprised of Chief Justice Kiefel and Justice Gordon) heard and refused an application for special leave sought by the Commissioner of Taxation (Commissioner) in relation to the Full Federal Court’s decision in Commissioner of Taxation v Glencore Investments Pty Ltd (2020)  FCAFC 187; 384 ALR 252 (Glencore).
By Kardelen Lule (ADMD / MAVIOGLU & ALKAN, Turkey)
The rate of corporate tax was amended significantly with the Law No.7316 Amending the Law on Collection of Public Receivables and Certain Laws (“Law No.7316”) published in the Official Gazette dated April 22, 2021.
The rate which was earlier determined for 2018, 2019, and 2020 was 22%. Article 11 of the Law No.7316 amended the corporate tax rates by adding Temporary Article 13 to Corporate Tax Law No.5520 (“CTL”) which increased corporate tax rates to 25% for 2021 and to 23% for 2022. For institutions subject to special accounting periods (the regular period is January 1 to December 31), the mentioned rates will be applied to the earnings of these institutions for the accounting periods starting in the relevant year.
By Varapa Aurat (Consultant, Tilleke & Gibbins, Thailand)
On May 6, 2021, a new transfer pricing notification from Thailand’s Tax Department was officially published in the Government Gazette. The Notification of the Director-General of the Tax Department Re: Income Tax (No. 400), which was first announced earlier in the year, prescribes the criteria, methods, and conditions for Tax Department officials on how to assess income and adjust expenses for transactions between related parties (as defined in Section 71 bis of the Tax Code) that engage in intercompany transactions where conditions between the two parties in their commercial or financial relations differ from those that would be made between independent parties (i.e., where the transaction is not an “arms length” transaction).
Yellen has said that the global minimum corporate tax pairs well with our domestic corporate income tax proposals and has the special virtue of helping level the playing field for US business.
Under this tax scheme, interest deductibility is denied in relation to loan arrangements between affiliated companies established within the EU, irrespective of whether the terms and conditions of those arrangements remain at arm’s length or not.
The WCO facilitator focused on the Customs valuation treatment of related-party transactions and instruments adopted by the Technical Committee on Customs Valuation. The OECD facilitator elaborated on the arm’s length principle and its application, comparability analysis, and transfer pricing documentation.
The G7 (which includes the UK, the US, Canada, Japan, Germany, France, Italy, plus the EU) agreed the principles of an ambitious two Pillar global solution to tackle the tax challenges arising from an increasingly globalized and digital global economy.
The tax ruling was given on November 18, 2020. According to Coca-Cola, the US Tax Court’s ruling raises fundamental questions of tax, administrative, and constitutional law warranting further consideration by a full Tax Court.
The facts of the tax dispute are as follows. Upon examination of the company’s 2007-2009 returns, IRS determined that the company’s methodology did not reflect arm’s length principle because it overcompensated the supply points and undercompensated the company for the use of its intellectual property.
The US tax authority reallocated income between the company and the supply points employing a comparable profits method that used the company’s unrelated bottlers as comparable parties. These adjustments increased the company‘s aggregate taxable income for 2007-2009 by more than USD 9 billion.
In its decision, the Tax Court said that the IRS did not abuse its discretion by reallocating income to the company by employing a comparable profits method that used the supply points as the tested parties and the bottlers as the uncontrolled comparables. The US Tax Court further held that the tax authority did not err by re-computing the company’s losses after the comparable profits method changed the income allocable to the company’s Mexican supply point, a branch of the company.
In a Motion for Reconsideration of findings or opinion filed on June 2, the company said that “the IRS is attempting to impose billions of dollars in additional taxes on Coca-Cola in this case under a different tax calculation method than that on which Coca-Cola justifiably relied and which the IRS audited and approved for over a decade before retroactively requiring Coca-Cola to use a new and different method for tax years long past. The IRS’s attempt is arbitrary, capricious, and unconstitutional.”
The company added that the US Tax Court has the opportunity to correct these fundamental errors now, and with the utmost respect, Coca-Cola asks the Court to reexamine its opinion in this nationally important, precedential tax case.
The US Tax Court enjoys substantial discretion to reconsider findings of fact and conclusions of law under Tax Court Rule 161, the company said.
The author is Alex Hunter, Editor, TP News. He oversees and updates the publication and also regularly writes news stories about transfer pricing and international tax law. Alex is reachable at firstname.lastname@example.org
On March 18, 2021, the Government approved Law to require taxpayers/ intermediaries to report information on certain tax arrangements.
The Cyprus Tax Department will not impose administrative fines for overdue submission of DAC6 information that will be submitted until the September 30, 2021.
The penalty relief applies to:
- Reportable cross-border arrangements that have been made between 25 June 2018 and 30 June 2020 and had to be submitted by 28 February 2021.
- Reportable cross-border arrangements that had been made between 1 July 2020 and 31 December 2020 and had to be submitted by 31 January 2021.
- Reportable cross-border arrangements made between 1 January 2021 and 31 August 2021, that had to be submitted within 30 days from the date they were made available for implementation or were ready for implementation or the first step in the implementation has been made, whichever occurred first.
- Reportable cross-border arrangements for which secondary intermediaries provided aid, assistance or advice, between 1 January 2021 and 31 August 2021 and had to submit information within 30 days beginning on the day after they provided aid, assistance or advice.
On March 18, 2021, the Government approved Law to require taxpayers/ intermediaries to report information on certain tax arrangements.
The letter states that AbbVie appears to have shifted profits offshore while reporting a domestic loss in the United States to avoid paying US corporate income tax. The Committee has asked the company to provide answers to specific tax questions no later than June 16, 2021.
The OECD has received comments from 22 stakeholders including the Big 4, Mexican Institute of Public Accountants, International Chamber of Commerce, European Business Initiative on Taxation, Business at OECD (BIAC), and Vienna University of Economics and Business, among others.
By CPA David Ndiritu Mwangi (Principal Consultant, Hisibati Consulting, Nairobi, Kenya)
The Kenyan government tabled the Finance Bill 2021 in Parliament on 11/05/2021. Unlike the prior year, the bill does not introduce new taxes. However the bill proposes significant changes that will indeed have a far reaching effect on multinational organizations operating in Kenya.
On June 2, 2020, USTR initiated investigations into digital services tax adopted or under consideration in ten jurisdictions: Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey, and the UK.
The reporting will take place within 12 months from the date of the balance sheet of the financial year in question. The directive sets out the conditions under which a company may obtain the deferral of the disclosure of certain elements for a maximum of five years.
The Observatory will be fully independent in conducting its research, objectively informing policymakers and suggesting initiatives that could help to better tackle tax avoidance and aggressive tax planning, among other things.
The paper analyzes corporate tax spillovers in Europe with a focus on the channels and magnitudes of both profit shifting and corporate income tax competition.
The portal includes improved security using myGovID digital identity services, linked to your company’s ABN using Relationship Authorisation Manager (RAM).
By Muzammal Rasheed (Co-founder, CEO & Head of Practice, WTS Global, Pakistan)
The Appellate Tribunal Inland Revenue of Pakistan (ATIR) has disapproved applicability of Section 111 on Non-Residents in the case (2020) 122 TAX 10 (Trib.).
ATIR is the second forum of appeal against the Tax Assessment Orders issued by the Tax Authority. The appeal was filed by a Non-Resident Individual, challenging the best judgment assessment finalized by the Inland Revenue Department under section 121/111 of the Income Tax Ordinance, 2001 on ex parte basis.
Apart from the technical grounds raised before ATIR, the major thrust of the arguments on behalf of appellant involved the contention that the taxpayer was a non-resident person, having no Pakistan source income during the relevant tax year.
The Budget proposes to increase the income tax rate for C corporations from the existing rate of 21 percent to 28 percent. The proposal would be effective for taxable years beginning after December 31, 2021.
The revised proposals respond to both the Inclusive Framework blueprint report released for public consultation in October 2020 and the recent proposals from the US to revise the blueprint proposals.
Public comments on the draft guidance must be received by June 18, 2021.
By Zaina Zahir (Senior Associate, CTL Strategies, Maldives)
Transfer Pricing Landscape
With the commencement of the Income Tax Act in January 2020, the transfer pricing landscape has significantly changed in the Maldives. Within the past 12-months, the Maldives tax administration – Maldives Inland Revenue Authority – has published the Transfer Pricing Regulation, the Country-by-Country Reporting Regulation and the Advance Pricing Arrangement Regulation.
Through the Transfer Pricing Regulation and the Country-by-Country Reporting Regulation, the Maldives – aligning its practices with the OECD’s Transfer Pricing Guidelines – implements the three tiers of transfer pricing documentation which require qualifying enterprises to prepare the Master File, the Local File, and Country-by-Country Reports.
Hence, the subsequent issuance of the APA Regulation on 16 March 2021 has provided taxpayers with the much-needed certainty in the domain of transfer pricing in the Maldives. Taxpayers now have the option to enter into an ahead of time arrangement with the Maldives tax administration, agreeing on the transfer pricing methodology and the prices to be applied to a set of related party transactions for a period not exceeding 5 consecutive years. Taxpayers can enter into unilateral, bilateral or multilateral APAs. This is expected to provide a more promising, non-adversarial environment for investors.
The APA Regulation sets out the procedure to be followed in entering into an APA and introduces several provisions on the administration of the APA. This includes the imposition of an annual compliance report filing requirement, details on circumstances under which the arrangement can be revoked or cancelled and more significantly, introduction of a roll back provision which would allow taxpayers to enter into APAs retrospectively.
The application process
The Maldives, similar to many other jurisdictions, implements a 3-phase process in entering into an APA. Initially, a pre-filing consultation is required, through which the scope of the arrangement is identified, the controlled transaction in question is understood and discussions are held in relation to the broader terms of the arrangement.
Subsequently, a formal application requesting for an APA can be lodged with detailed information on the elected transfer pricing methodology, comparability analysis, company’s group structure, and other relevant information. From thereon, the application is passed through evaluation and a final decision is made. Once the parties have successfully entered into an APA, an annual compliance report is to be filed along with the income tax return.
The APA process is comprehended to be a lengthy and comprehensive process. While the regulation does not specify a time frame within which the Maldives tax administration is to complete the process, it is still believed to be less time consuming than dealing with hefty transfer pricing audits and the resulting dispute resolution efforts.
Rollback to prior years
The regulation states that having considered certain factors, an APA can give coverage to tax years for which the deadline for submission of the income tax return has already elapsed. Overall, the allowability of such a retrospective coverage can be viewed as a more efficient method to administer and resolve unsettled transfer pricing disputes.
However, the application of the provision is unclear – the Regulation merely states that in permitting a roll back, the tax administration will look into the APA duration of participating jurisdictions; surrounding circumstances of the transaction in question; whether a tax audit or investigation is being carried out; or whether any legal actions are being taken in relation to the transaction in question.
Hence, a complete guideline on the applicability and limitations of the roll back provision is still awaited.
The Regulation comprises provisions on possible revisions or cancellation of an APA in case of a material change in any of the critical assumptions or conditions or changed economic circumstances. On the other hand, in cases of fraud, deliberate misrepresentation of information or non-compliance, the arrangement may even be declared void ab-initio.
The inclusion of the option to enter into an APA with the Maldives tax administration is viewed as a diversion from the customary audit techniques applied to related party transactions which often results in robust assessments – paving the way to reduce the much frequent transfer pricing disputes in the Maldives.
It may be beneficial for multinational enterprises doing business in the Maldives to enter into an APA especially if the underlying set of related party transactions involve complex business restructuring, intercompany financing and intangibles. Though, when entering into an APA, consideration should always be put on whether the surrounding facts will remain constant for the coming years.
The letter states that “there is bipartisan consensus for ensuring that every country plays by the same rules, including China – as President Joe Biden recently said. No OECD agreement should provide carve-outs or exceptions for our biggest foreign competitors, including China.”
Tállai emphasized that Hungary would not relinquish one of the most important elements of its economic sovereignty, the right to set taxes. According to him, the idea of a global minimum tax is in the interests of several high-taxing economic powers, because they were disadvantaged by international tax competition.
On the agenda are measures to ensure greater public transparency by proposing that certain large companies operating in the EU publish their effective tax rates.
These reports evaluate the progress made by these eight tax jurisdictions in implementing any recommendations resulting from their stage 1 peer review. The results from the peer review and peer monitoring process demonstrate positive changes across all eight jurisdictions, although not all show the same level of progress.
By Błażej Kuźniacki (Attorney-at-Law, Deputy Director for Strategic Tax Advice & Dispute Resolution,PwC Poland) & Katarzyna Kotowska (Senior Associate, Transfer Pricing, PwC Poland) & Piotr Niewiadomski (Tax Advisor, Director in Transfer Pricing, PwC Poland)
The definition of controlled transaction in the light of Polish Corporate Income Tax Act (CIT Act) and explanatory memorandum
According to Article 11a point 6 of the CIT Act, a controlled transaction refers to economic activity identified on the basis of actual behavior of the parties to the transaction, including allocation of income to the foreign permanent establishment (PE), where the conditions are imposed/made as a result of existing relations.
The US Treasury expressed its belief that the international tax architecture must be stabilized, that the global playing field must be fair, and that we must create an environment in which countries work together to maintain our tax bases and ensure the global tax system is equitable.
The Conference has agreed that as with any international agreement, the MLI shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.
The Delhi High Court in its recently pronounced decision in the case of Concentrix Services Netherlands BV WP (C) 9051/2020 and Optum Global Solutions International BV WP (C) 882/2021 invoked the ‘Most Favoured Nation’ (MFN) clause under the India-Netherlands double taxation avoidance agreement (Tax Treaty) and applied a reduced 5% withholding rate on dividend income paid by Indian companies to Dutch shareholders.
Interpretation Note 115 relates to withholding tax on interest and Interpretation Note 116 relates to withholding tax on royalties.
The Manual is focused on transfer pricing in a global environment, while it provides guidance on design principles and policy considerations. It also addresses the practical implementation of a transfer pricing regime in developing countries and shares examples of country practices from developing countries, such as Brazil, China, India, Kenya, Mexico, and South Africa.
Donohoe said that he desired “an outcome that is a fair and balanced compromise by and for all the 139 countries in the OECD Inclusive Framework.”
Ireland’s commitment remains resolute towards reaching an agreement on digital economy taxation, Ireland’s Minister for Finance, Paschal Donohoe, has said.
The consultation period will run until May 7, 2021.
Ireland’s Finance Minister on April 7 launched a public consultation on Ireland’s future tax treaty policy, particularly in the context of potential outcomes of international tax discussions at the OECD.
The OECD’s Committee on Fiscal Affairs has designated Fabrizia Lapecorella as the next Chair of the Committee beginning January 2022.
Lapecorella has served as Italy’s Director General of Finance since June 2008. As Director General of Finance, she is responsible for tax policy, domestic European and international, the governance of the Tax Agencies, the coordination of the IT infrastructure serving the whole Tax Administration, and the administrative services for the Tax Judicial system.
The reports evaluate the progress made by these eight jurisdictions in implementing any recommendations resulting from their stage 1 peer review. They take into account any developments in the period January 2018- August 2019 and build on the MAP statistics for 2016-2018.
The data compiled for this peer review demonstrate that the BEPS Multilateral Instrument has been the tool used by the vast majority of jurisdictions that have begun implementing the Action 6 minimum standard, and that the MLI has started to impact tax treaties of jurisdictions that have ratified it.
The Arbitration Profiles have been developed to provide taxpayers with additional information on the application of Part VI of the MLI for each jurisdiction choosing to apply that Part. The Arbitration Profiles also allow those jurisdictions to make publicly available clarifications on their position on the MLI Arbitration.
Janet Yellen, who took oath as the 78th Secretary of the US Department of the Treasury on January 26, held a discussion with counterparts in France, Germany and the UK on digital economy taxation.
According to the update, Ireland will seek to implement interest limitation rules in accordance with the Anti-Tax Avoidance Directive (ATAD) standard; legislate for new international tax transparency rules for digital platforms; legislate for reverse hybrids aspect of ATAD anti-hybrid rules; adopt the authorized OECD approach for transfer pricing of branches; and consider actions that may be needed in respect of outbound payments from Ireland and our wider withholding tax regime.
On October 12, 2020 the OECD/G20 Inclusive Framework (IF) released the Report on Pillar One Blueprint. This is a working document that presents the IF’s current thinking on the scope and application of changes to the international tax system to address the Tax Challenges Arising from Digitalization. Specifically, the OECD is seeking broader consensus and approval for its proposals before moving forward further into a more detailed design.
The toolkit aims to help countries implement effective transfer pricing documentation requirements so that they can protect their tax bases, reduce profit shifting, and raise much-needed revenues for the recovery phase.
For Estonia, the BEPS MLI will enter into force on May 1, 2021.
In a release issued on January 14, the USTR said that the each one of these digital services taxes discriminates against US companies, is inconsistent with prevailing principles of international taxation, and burden or restricts US commerce.
Access to submit DAC6 reports shall be available in the coming days, the tax authority said.
The meeting will be held virtually and will be open to the public.
In particular, the Presidency will address the challenges of European taxation, including the model for taxation of the digital economy, under the principles of fairness and tax efficiency.
The Blueprints reflect the convergent views of the Inclusive Framework on many of the key policy features, principles and parameters of both Pillars, and identify remaining technical and administrative issues as well as policy issues where divergent views among Inclusive Framework members remain to be bridged.
The US Trade Representative said that it has decided to suspend the tariffs in light of the ongoing investigation of similar DSTs adopted or under consideration in ten other jurisdictions.
US Trade Representative has published findings on digital service tax in India, Italy, and Turkey calling it discriminatory and burdensome.
If taxpayers choose to apply the indicative margin, they will apply the indicative margin on the appropriate base reference rate selected for the related-party loan.
The meeting will be held on January 14-15, 2021.
Barbados has ratified the BEPS MLI covering 31 of its tax treaties.
The transfer pricing measures gazetted by Malaysian government on December 31 provide a five percent surcharge in case of transfer pricing adjustments.
Maltese tax authority issues key guidance on DAC6 reportable cross-border arrangements. The guidance explains key concepts with the help of illustrations.
The UK tax authority, HM Revenue and Customs, has announced that it will repeal the DAC6 reporting requirement in 2021 and replace it with the OECD’s mandatory disclosure rules (MDR).
The announcement was made after completion of the negotiations between the UK and the EU on a Free Trade Agreement (FTA).
In a letter sent to stakeholders on December 31, HMRC said that reporting under DAC6 will still be required for a limited time, but only for arrangements which meet hallmarks under Category D, in line with the UK’s obligations under the FTA.
Category D sets out specific hallmarks concerning automatic exchange of information and beneficial ownership.
The International Tax Enforcement (Disclosable Arrangements) (Amendment) (No. 2) (EU Exit) Regulations, 2020 – laid before the House of Commons on December 30 – state that “(5) For the purposes of these Regulations, the DAC is to be read as if— (h) in Annex IV, Part 1 [the Main Benefit Test] and hallmark categories A, B, C and E in Part II were omitted.”
In the coming year, the UK will consult on and implement the OECD’s MDR as soon as practicable, to replace DAC6 and transition from European to international rules, HMRC told stakeholders.
Comments on the draft Circular on DAC6 must be submitted to the Italian tax authority by January 15, 2021.
The Tax and Duty Manual Manual on DAC6 has been updated in a number of respects. The updates are set out in Appendix V.
Greece has dropped Oman and Seychelles from the list of preferential tax regimes for 2019.
The guidance on transfer pricing implications of the COVID-19 pandemic represents the consensus view of the 137 members of the OECD Inclusive Framework on BEPS.
Germany and Pakistan have deposited their instrument of ratification for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI).
The public consultation meeting will be held virtually on January 14-15, 2021.
The information provides with a better understanding of the extent to which the HTVI approach described in Chapter VI of the Transfer Pricing Guidelines has been adopted and is applied in practice by countries around the world.
81 jurisdictions are now fully in line with the BEPS Action 5 minimum standard.
Tax firm Andersen has hired Brian Untermeyer as a Managing Director in the firm’s Dallas office.
Untermeyer will join the firm’s international tax practice while serving in a key national role within the US National Tax practice. Untermeyer comes to the firm with more than 30 years of experience in advising inbound and outbound multinational public and private companies on US domestic and international tax issues across multiple industries.
The MNE’s suitability for ICAP will be considered on a case-by-case basis. The MNE may propose for participating tax administrations it wishes to involve in its ICAP risk assessment, which will be subject to the participating tax administrations’ agreement.
The Australian Taxation Office said that the multinational anti-avoidance law has been successfully implemented, with the restructures resulting in more than AUD 8 billion additional taxable sales being booked in Australia.
The Inland Revenue Authority of Singapore stated that some jurisdictions have implemented unilateral measures to address the tax challenges of digitalization adding that “companies may have incurred additional taxes overseas due to such measures.”
Canada states that Denmark’s reservation “exceeds the scope of cases for which a reservation may be made under that provision.”
The Plan – released on November 17 – includes guidance projects that will be the focus of efforts during the 12-month period from July 1, 2020, through June 30, 2021.
Richard Minor has joined the US Council for International Business (USCIB) as its International Tax Counsel.
Comments must be received by December 18.
Around 85 percent of the MAPs concluded for transfer pricing cases in 2019 fully resolved the issue, which reflects an improvement in the collaborative approach taken by competent authorities.
DAC6 has been implemented into Maltese legislation by virtue of legal notice L.N. 342 of 2019.
Comments must be received by December 14.
International trade and commerce are critical to sustaining the economic development of a country. To attain high growth momentum, a Country must engage in trade negotiations and agreements at multilateral, regional, and bilateral levels. India has been a party to several bilateral and regional trade agreements, and quite a few important ones are under negotiations and slated to be finalised soon.
However, India’s experience with the trade agreements has so far been mixed: favourable trade balance mostly in the case of smaller partners, and deficit with the larger ones. This coupled with the fact that trade agreements have been misused by availing preferential duty rate against the import of goods that did not meet the originating criteria have only added to the government’s list of concerns.
The exact meeting times during this band of dates and the modalities of the meetings will be advised shortly.
The Suggested Approach is aimed at helping African countries that are considering implementing digital service tax to tax transactions of highly digitalized businesses.
In July 2020, the General Court annulled the Commission’s 2016 decision concluding that Ireland granted illegal State aid to Apple through selective tax breaks.
For Jordan, the BEPS MLI will enter into force on January 1, 2021.
The BEPS MLI will enter into force for both countries on January 1, 2021.
More than 2,500 bilateral relationships for CbC exchanges are now in place.
The new tax treaty implements the minimum standards in accordance with the OECD’s project on base erosion and profit shifting.
As part of the obligation to implement the European-wide mechanism to counter base erosion and profit shifting, the German Federal Ministry of Finance circulated a draft law on 10 December 2019 (hereafter referred to as “draft law”). Besides conforming to the requirement as directed by the EU Anti-Tax Avoidance Directive, the draft law brings about the modification to the current transfer pricing legislation of both the Foreign Tax Act (Außensteuergesetz) and the Fiscal Code (Abgabenordnung), and it introduces topics not previously codified into the legislation in accordance with the BEPS concepts introduced by the OECD. The draft law takes a strict stance on businesses’ actual conducts rather than their contractual arrangements.
The data, released on July 8, is a major output based on the country-by-country reporting requirements for MNEs under the BEPS project.
That decision was unequivocally in Cameco’s favour in its dispute of reassessments issued by CRA for the 2003, 2005, and 2006 tax years.
The rise of global digital economies has introduced uncertainties and exposed many loopholes in our existing tax system, with the most significant issues being the difficulties in collecting tax from those conducting digital activities without a physical presence in a jurisdiction. Thailand has long considered reforming its traditional tax system to better cover the digital economy and digital transactions, believing that foreign companies engaged in the same transactions in Thailand as local companies should also pay tax to the country. This includes value added tax (VAT) on the provision of digital services.
The guidance provides detailed explanations on cross-border arrangement, definitions of intermediaries and relevant taxpayers, and the main benefit test, among others.
The 30-day time period will commence on January 1, 2021.
By Husam Shareef (Partner, CTL Strategies, Maldives)
On June 10, 2020, the Maldives tax administration, Maldives Inland Revenue Authority (MIRA), issued the country’s first transfer pricing regulation. The Regulation is made pursuant to the new Income Tax Act, which came into effect from January 1, 2020. The Regulation sets out the rules to be followed by enterprises that are required to maintain transfer pricing documentation and stipulates the criteria which exempt enterprises from maintaining such documentation. The Maldives has had a corporate tax regime since July 18, 2011, however, this is the first time that taxpayers are required to follow a specific transfer pricing documentation requirement.
The deferral is aimed at providing taxpayers and intermediaries dealing with the impacts of the Covid-19 pandemic with additional time to ensure that they can comply with their obligations.
By Maurício Barros (Partner at Gaia Silva Gaede Advogados in São Paulo, former Taxpayer-Appointed Judge at the São Paulo Taxes and Fees Court – TIT/SP (2014-2019) and a former Visiting Professor at the Getulio Vargas Foundation and at the Mackenzie Presbiteryan University) & Luiz Guilherme de Medeiros Ferreira (Tax lawyer, São Paulo and Member of the Tax Litigation Commission at the Brazilian Bar Association)
Amid the covid-19 pandemic and the imminent financial crisis of companies, Draft Bill (DB) 2358/2020, drafted by Deputy João Maia, is making its way through the Brazilian Congress. If it becomes law, it will institute a digital services tax (DST) in Brazil, like similar taxes levied in other countries.
By Nishit Parikh (Partner, Sudit K Parekh & Co LLP, India)
India-Mauritius Tax Treaty has had its fair share of controversy in India. This saga continues even today, as recently Authority for Advance Ruling (‘AAR’) in India rejected a Foreign Private Equity player’s claim for Tax Treaty benefit considering the entire arrangement to be for tax avoidance.
The guidance covers topics such as the purpose of reporting, the kinds of arrangements that must be reported, who should report the information, the list of information that must be submitted, and the reporting timelines.
Companies engaged in undesirable tax planning can apply for individual support if they satisfy two tax-related conditions concerning business location and transactions.
Gurría was responding to recent statements and exchanges regarding the ongoing negotiations to address the tax challenges of the digitalisation of the economy.
Leading Swiss law firm Bär & Karrer has hired Raoul Stocker as a tax partner.
Daniel Hochstrasser, senior partner, commented: “He will support our tax team in corporate tax law, dispute resolution in national and international tax law, as well as transfer pricing. His legal expertise and know-how will help us continue to grow our offering for our clients.”
By Catherine O’ Meara (Partner, Matheson, Dublin)
The ability to claim relief from double taxation for transfer pricing adjustments is increasingly important as taxpayers face audits worldwide. The Irish Revenue Commissioners (“Revenue”) have recently issued new guidelines for taxpayers seeking correlative adjustments (“CA Guidance”) in Ireland for transfer pricing adjustments by tax treaty partner jurisdictions.
Comments must be received by July 22.
By Luís Eduardo Schoueri (Full Professor of Tax Law at University of São Paulo & Senior partner at Lacaz Martins, Pereira Neto, Gurevich & Schoueri Advogados) & Mateus Calicchio Barbosa (PhD Candidate and M.Sc. at University of São Paulo & Tax partner at Lacaz Martins, Pereira Neto, Gurevich & Schoueri Advogados)
It is said that in every crisis lies an opportunity. If the quote means that possibilities may emerge, in the tax realm taxpayers also have a new momentum to the danger component of the notion. In Brazil, outdated – not to say dangerous – tax alternatives have been put on the table to meet the recent budgetary needs. Certain wealth and capital taxes on both companies and individuals, despite previous and frustrated propositions since mid-90s, have been discussed while the government seeks a way out of an unprecedented public debt in the years to come.
By Kelechi Ugbeva (Managing Partner, Blackwood & Stone, Nigeria)
Existing global tax rules such as, the arm’s length principle and principle of physical presence may not be robust enough to accommodate the peculiarity of digital activities and digital taxation. To this end, the OECD has come up with a few proposals on how digital activities may be taxed.
The guidance states that the OECD’s Multilateral Instrument on BEPS adopted in Finland on February 13, 2019, must be taken into account when applying tax treaties.
The measure will apply to financial flows to countries with a corporate tax rate of under nine percent and to countries on the EU blacklist, even if the Netherlands has a tax treaty with them.
The DAC6 reporting requirement was originally intended to take effect from July 1, 2020, postponement has been agreed in view of COVID-19 pandemic.
The DAC6 reporting requirement will come into effect on July 1, 2020.
The amendments generally apply from July 1, 2019.
These ten trading partners are: Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey, and the United Kingdom.
The Bill seeks to give effect to five key changes to the way the digital economy is currently taxed, to better capture value created into the tax system.
Technology, considered as a factor of production, has virtually been adopted in all sectors of the economy in order to enhance productivity, enlarge market reach, and reduce operational costs. The adoption of technology is demonstrated by the spread of broadband connectivity in businesses, which in almost all countries of the Organisation for Economic Co-operation and Development (“OECD”) is universal for large enterprises and reaches 90% or more even in smaller businesses.
The six member states are: Cyprus, Hungary, Ireland, Luxembourg, Malta, and the Netherlands.
By Ramon Tomazela Santos (Partner, Mariz de Oliveira e Siqueira Campos Advogados)
The taxation of large technology companies has been at the center of the global debate in recent years, as their disruptive business models allows the exploitation of the market of a country without a physical presence. The underlying assumption surrounding the debate is that the application of current tax rules to companies operating in the digital economy has led to a misalignment between the place where profits are taxed and the place where value is created, due to the growing relevance of interaction and engagement with a user base for digital business.
The government intends to exempt only those entities that provide legal advice.
India’s Union Budget for the fiscal 2020-21 was announced in February 2020 and the tax proposals, after undergoing some important changes, were approved by the Indian Parliament and received Presidential assent on March 27, 2020. With this, the annual exercise of amending India’s tax law was completed, and the tax changes are effective from April 1, 2020.
On the tax front, some significant amendments have been made – such as widening the scope of digital tax, abolition of dividend distribution tax, more stringent tax residency rules for non-resident Indians etc.
We have analyzed here the key international tax changes impacting non-residents (MNEs and others having Indian business or nexus).
The Guidance notes that it is unlikely that the COVID-19 situation will create any changes to an entity’s residence status under a tax treaty.
On February 11, 2020, the OECD released its Final Report, Transfer Pricing Guidance on Financial Transactions, (Final Guidance), which was simultaneously incorporated into the OECD Transfer Pricing Guidelines. With respect to inter-company loans, the new Chapter X of the Transfer Pricing Guidelines is not limited to considerations for interest rate pricing, but also includes a framework for assessing the instrument’s accurate delineation as debt. Going forward, taxpayers with lenders or borrowers in OECD countries should consider this new guidance and augment their documentation accordingly. Below are some of the items that these taxpayers should consider to offer a proactive defense of potentially scrutinized areas.
By Luis Schoueri (University of Sao Paulo; Lacaz Martins, Pereira Neto, Gurevich & Schoueri Advogados)
There is no divine truth about what the Arm’s Length Standard (ALS) actually means. Its content can only be determined by a decision, which can be reached by a court or by means of political consensus. There is no international tax court with jurisdiction to promote harmonization among countries on the content of the ALS and all efforts in this direction are made by means of negotiation. Such decisions affect not only the extent to which double (non-)taxation will be avoided, but also concern the country to which income is allocated, which may render the issue controversial where countries present distinct patterns of capital in- and outflow.
The Government is introducing from April 1, 2020, a new two percent digital services tax on the revenues earned by certain digital businesses.
By Géry Bombeke (Partner, Baker McKenzie, Brussels)
On February 25, 2020, the Belgian Tax Administration published a new transfer pricing Circular (Circular 2020/C/35) (TP Circular) summarizing the post-base erosion and profit shifting (BEPS), OECD Transfer Pricing Guidelines and reflecting the tax authority’s views thereon.
Global law firm White & Case LLP has hired Will Smith as a partner in the firm’s London office.
Emily Clark has joined corporate law firm Travers Smith LLP as head of tax.
Comments must be received by May 27.
The new treaty will be effective from January 1, 2021.
Julia McCullagh has joined BDO LLP’s London office as Partner, International Corporate Tax.
The Budget proposes to restrict net interest expense deductions to 30% of earnings for assessment years starting January 1, 2021.
The reports highlight how well these jurisdictions are implementing BEPS Action 14 minimum standard on making tax treaty dispute resolution more timely, effective, and efficient.
International Tax Authority informs BVI Constituent Entities, that are part of Multinational Entity Group, that it will soon be ready to receive filings for CbC reporting.
The report would include CbC financial filings for the information, including profits, taxes, employees, and tangible assets – that these corporations already provide to the IRS on an annual basis.
The corrections are effective on February 19, 2020, and apply from December 6, 2019.
The definition of “significant global entity” to include members of large business groups headed by private companies, trusts, partnerships, investment entities, and individuals.
The OECD analysis shows that Pillar Two could raise a significant amount of additional tax revenues.
The report contains guidance on how the accurate delineation analysis applies to the capital structure of an MNE within an MNE group.
Comments must be received by March 6, 2020.
The “safe harbour” issue is included in the list of remaining work, but a final decision on this issue will be deferred until the architecture of Pillar One has been agreed upon.
Between 2019-2020, HMRC secured GBP 480 million through DPT investigations.
The webcast will be held on January 31, 2020, at 14:00-15:00 (CET).
The BEPS MLI will enter into force for these two countries on May 1, 2020.
The deadline for filing country-by-country reports and master files is December 10-23, 2020.
The BEPS MLI will enter into force for Liechtenstein on April 1, 2020.
The tax treaty applies from January 1, 2020.
The revised transfer pricing reporting threshold for 2020 is DOP11,552,402.
The additional interpretative guidance contains complete set of guidance concerning the interpretation and operation of BEPS Action 13 issued so far.
The tax treaty will become effective after both countries have completed their respective domestic procedures.
By Professor William Byrnes (Texas A&M University School of Law)
The OECD will hold a public consultation meeting on December 9.
French Finance Minister, Bruno Le Maire, termed the US’ proposed action as unacceptable.
The Commission may bring the cases before the Court of Justice of the EU if Austria and Ireland do not act by February 1, 2020.
The tax treaty and Protocol implement the BEPS minimum standards to tackle tax planning strategies that exploit gaps and mismatches in tax rules.
International tax veteran Brian Abbey has joined Global Tax Management as Managing Director, International Tax.
Transfer pricing specialist Kevin Norton has joined Deloitte Ireland’s tax team as partner.
Earlier in July 2019, the US Trade Representative opened an investigation into whether the French DST is discriminatory in nature and harms US’ interests.
The tax treaty will enter into force after both countries have completed their respective internal procedures.
Comments must be received by December 16, 2019.
The paper highlights the marked rise in corporation tax receipts and corporate profitability since 2014.
Any proposed tax must be levied on profits and not revenue, Amazon’s Vice President (Global Tax), Kurt Lamp, said.
Comments must be received by December 2.
The protocols contain an anti-abuse clause.
The additional interpretative guidance will help MNE Groups in avoiding common errors made in preparing CbC reports.
For Denmark the BEPS MLI will enter into force on January 1, 2020.
By Ricardo Rendón (Partner, Chevez, Ruiz, Zamarripa y Cía, S.C., Mexico)
On September 8, 2019, the Executive Branch of the Mexican Government submitted to the Congress Tax Reform for 2020, which includes key tax changes to the country’s tax law primarily inspired by the OECD’s base erosion and profit shifting (BEPS) project.
By Catherine O’ Meara (Partner, Matheson, Dublin)
The Irish Government recently published a Transfer Pricing Rules Feedback Statement, which confirms that changes to the country’s transfer pricing rules and their implementation are forthcoming.
The rulings practically resulted in over 50 percent and in some cases up to 90 percent of those companies’ accounting profit being tax exempt.
According to the statistics, transfer pricing cases continue to take more time with average time being approximately 33 months (30 months in 2017).
Comments must be received by October 4, 2019.
Gurría also described the delivery of the OECD’s BEPS package in 2015 as one of the two “big bang” developments that transformed the global tax landscape in recent years.
Japan and Peru have “in principle” agreed to conclude a tax treaty.
Amazon is a major UK employer and currently employs over 27,500 UK people. The company said that this number would increase to over 29,500 this year.
Global law firm Shearman & Sterling has roped in Jay Singer as partner to the firm’s tax practice. Jay will be based in the firm’s Washington, D.C. office.
The tax authority is considering whether to appeal the decision.
The review reveals that countries have largely adopted their domestic CbC reporting rules in line with the BEPS Action 13 minimum standard.
The proposals would be included in Finance Bill, 2019 and, if enacted, would apply for chargeable periods commencing January 1, 2020.
Mandatory binding arbitration clause is included in the tax treaty protocols to resolve tax treaty disputes.
A former US Treasury international tax Counsel, Brian Jenn, has joined McDermott Will & Emery as its partner.
Jenn will be based out of the firm’s Chicago office.
Hong Kong issues guidance to ensure compliance with the country’s transfer pricing documentation requirements.
The BEPS MLI will enter into force in both countries on December 1, 2019.
While members of the Inclusive Framework on BEPS did not yet agree on the conclusions, they committed to work together to deliver a final report in 2020, with an update in 2019.