International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Tuesday, August 1, 2017

The Platform for Collaboration on Tax invites comments on a draft toolkit on the taxation of offshore indirect transfers of assets

The Platform for Collaboration on Tax – a joint initiative of the IMF, OECD, UN and World Bank Group – is seeking public feedback on a draft toolkit designed to help developing countries tackle the complexities of taxing offshore indirect transfers of assets, a practice by which some multinational corporations try to minimise their tax liability.   Download Discussion-draft-toolkit-taxation-of-offshore-indirect-transfers

The tax treatment of 'offshore indirect transfers' (OITs) — the sale of an entity located in one country that owns an "immovable" asset located in another country, by a non-resident of the country where the asset is located — has emerged as a significant concern in many developing countries. It has become a relatively common practice for some multinational corporations trying to minimise their tax burden, and is an increasingly critical tax issue in a globalised world. But there is no unifying principle on how to treat these transactions, and the issue was not addressed in the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project. This draft toolkit, "The Taxation of Offshore Indirect Transfers – A Toolkit," examines the principles that should guide the taxation of these transactions in the countries where the underlying assets are located. It emphasises extractive (and other) industries in developing countries, and considers the current standards in the OECD and the U.N. model tax conventions, and the new Multilateral Convention. The toolkit discusses economic considerations that may guide policy in this area, the types of assets that could appropriately attract tax when transferred indirectly offshore, implementation challenges that countries face, and options which could be used to enforce such a tax.

The toolkit responds to a request by the Development Working Group of the G20, and is part of a series the Platform is preparing to help developing countries design their tax policies, keeping in mind that those countries may have limitations in their capacity to administer their tax systems. Previous reports have included discussions of tax incentives, and external support for building tax capacity in developing countries. This series complements the work that the Platform and the organisations it brings together are undertaking to increase the capacity of developing countries to apply the OECD/G20 BEPS Project.

The Platform partners now seek comments by 25 September 2017 from all interested stakeholders on this draft. Comments should be sent by e-mail to taxcollaborationplatform@worldbank.org, a common comment box for all the Platform organisations. Spanish and French language versions of the toolkit are forthcoming and will also be posted for comment. The Platform aims to release the final toolkit by the end of 2017.

Questions to consider

  1. Does this draft toolkit effectively address the rationale(s) for taxing offshore indirect transfers of assets?
  2. Does it lay out a clear principle for taxing offshore indirect transfers of assets?
  3. Is the definition of an offshore indirect transfer of assets satisfactory?
  4. Is the discussion regarding source and residence taxation in this context balanced and robustly argued?
  5. Is the suggested possible expansion of the definition of immovable property for the purposes of the taxation of offshore indirect transfers reasonable?
  6. Is the concept of location-specific rents helpful in addressing these issues? If so, how is it best formulated in practical terms?
  7. Are there other implementation approaches that should be considered?
  8. Is the draft toolkit's preference for the 'deemed disposal' method appropriate?
  9. Are the complexities in the taxation of these international transactions adequately represented? 

Please do not restrict yourself to these questions; any other views you have on addressing the taxation of offshore indirect transfers of assets would be welcome. Comments and inputs on the draft will be published, and will be taken into consideration in finalising the toolkit.

Please note that all comments received will be made publicly available. Comments submitted in the name of a collective "grouping" or "coalition", or by any person submitting comments on behalf of another person or group of persons, should identify all enterprises or individuals who are members of that collective group, or the person(s) on whose behalf the commentator(s) are acting.

Media queries should be directed to:

IMF: media@imf.org
OECD: Pascal Saint-Amans, Pascal.Saint-Amans@oecd.org
UN: Alexander Trepelkov, trepelkov@un.org
World Bank Group: Julia Oliver, joliver@worldbankgroup.org

August 1, 2017 in BEPS | Permalink | Comments (0)

Monday, July 31, 2017

Will The BRICS Lead the Way In BEPS, CbCR, and CRS Now?

Communiqué of BRICS Heads of Tax Authorities Meeting issued in Hangzhou on 27 July 2017 

We, the Heads of Tax and Revenue of the Federative Republic of Brazil, the Russian Federation, the Republic of India, the People’s Republic of China and the Republic of South Africa held a meeting in Hangzhou on 27 July 2017 to discuss the potential areas of cooperation and exchange opinions and views based on our existing commitment to openness, solidarity, equality, mutual understanding, inclusiveness and mutually beneficial cooperation, as stated in the Goa Declaration issued on 16 October 2016 and echoed in the theme of the 2017 Xiamen Summit “BRICS: Stronger Partnership for a Brighter Future” so as to earnestly implement the leaders’ consensus and strengthen our partnership. We will continue our support to all international initiatives towards reaching a modern, globally fair and universally transparent tax system. In this regard we reiterate our commitment to the actions taken to promote interconnected growth and to ensure the fairness of the international tax system, particularly towards shaping and implementing the G20 tax agenda, multilateral tax cooperation and capacity building of developing countries. In accordance with the above, we conducted the meeting with the primary objective of promoting international tax cooperation and exchanging relevant knowledge and experience in these areas.  Download BRICS MOU for CbCR and CRS

Implementation of G20 Tax Agenda

We remain concerned about the world’s economic slow-down and cross-border tax evasion and avoidance that undermine resource mobilisation and the fairness of the tax system, and reaffirm our determination to work together to address and resolve these concerns and to curtail aggressive tax avoidance. We acknowledge our common understanding that profits should be taxed in those jurisdictions where the activities generating those profits are performed and where value is created. In this regard, we agree on continuing to share experiences on the measures we take to address the challenges in implementing the outcomes of the G20 tax reform. We remain committed to the facilitation of economic growth, as well as the timely, consistent and widespread implementation of the BEPS Project outcomes and call upon all relevant jurisdictions to join the Inclusive Framework on BEPS on an equal footing. We support monitoring the progress of BEPS implementation, with due regard to the four minimum standards. We acknowledge the first signing round of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS that took place on 7 June 2017. We confirm that as BRICS countries best represent emerging and developing economies, we will contribute actively to the consistent implementation of the G20 tax agenda through BRICS coordination to enhance tax certainty.

Multilateral Tax Cooperation

We recognize the significance of strengthening multilateral tax cooperation for BRICS countries in order to improve tax compliance and protect our tax base. In this respect, we signed the Memorandum of Cooperation between the BRICS Tax Authorities. We believe that BRICS countries should continue to proactively support and facilitate multilevel cooperation, including policy coordination, tax administration cooperation, the harmonization of interaction between tax authorities and taxpayers as well as dispute resolution procedures. We will continue to support multilateral tax cooperation, to develop effective communication, to further enhance position coordination as well as to identify holistic and consistent approaches to overcome challenges, achieve goals and facilitate consensus.

We recognize the key role of the exchange of information between competent authorities in preventing cross-border tax evasion and in designing a fairer and more transparent international tax system. In this regard we reiterate our endorsement for the global Common Reporting Standard for the Automatic Exchange of Information on a reciprocal basis. We commit without delay to implementing the Common Reporting Standard and to start exchanging information at the latest by September 2018. We call upon those jurisdictions that have not yet signed and ratified the Multilateral Convention on Mutual Administrative Assistance in Tax Matters to do so.

Capacity Building

We are convinced that building and developing a globally fair and modern tax system calls for the involvement of as many jurisdictions as possible. The key role of taxation in sustainable economic development has been attracting extensive attention globally. Developing countries continue to face serious challenges in their tax administration capacity. In this regard, we have reached basic agreement on how to implement the consensus reached at the G20 Hangzhou and Hamburg Summits on capacity building in the tax area and have drafted cooperation programmes for capacity building and experience sharing between BRICS countries and for other developing countries. We welcome the Inclusive Framework encouraging deeper engagement of developing countries in international tax cooperation. We should make profound efforts to implement the G20 tax reform outcomes and to respond to the various obstacles against international tax cooperation in spite of economic difficulties. We commit to continuously promote ongoing exchange and cooperation so as to jointly enhance our own tax capacity while at the same time providing effective and sustainable technical assistance to other developing countries. In this regard, we will contribute by hosting tax training programmes for BRICS countries and other developing countries at the training centers in BRICS countries. The common understanding outlined above has been summarized in the Memorandum of Cooperation between the BRICS Tax Authorities signed today

 

Economic Comment: The BRICS countries of Brazil, Russia, India, China and South Africa contain 42 percent of the global populace, representing a 23 percent share of the global economy and more than half of global growth.

 

 

July 31, 2017 in BEPS | Permalink | Comments (0)

Thursday, July 27, 2017

OECD releases further guidance for tax administrations and MNE Groups on Country-by-Country reporting (BEPS Action 13)

The Inclusive Framework on BEPS has released additional guidance to give certainty to tax administrations and MNE Groups alike on the implementation of Country-by-Country (CbC) Reporting (BEPS Action 13).

The additional guidance addresses two specific issues: how to treat an entity owned and/or operated by two or more unrelated MNE Groups, and whether aggregated data or consolidated data for each jurisdiction is to be reported in Table 1 of the CbC report.

The complete set of guidance related to CbC reporting issued so far is presented in the document released today. This will continue to be updated with any further guidance that may be agreed.

The BEPS Action 13 report (Transfer Pricing Documentation and Country-by-Country Reporting) provides a template for multinational enterprises (MNEs) to report annually and for each tax jurisdiction in which they do business the information set out therein. This report is called the Country-by-Country (CbC) Report.

To facilitate the implementation of the CbC reporting standard, the BEPS Action 13 report includes a CbC Reporting Implementation Package which consists of (i) model legislation which could be used by countries to require the ultimate parent entity of an MNE group to file the CbC report in its jurisdiction of residence including backup filing requirements and (ii) three model Competent Authority Agreements that could be used to facilitate implementation of the exchange of CbC reports, respectively based on the:

  1. Multilateral Convention on Administrative Assistance in Tax Matters;
  2. Bilateral tax conventions; and
  3. Tax Information Exchange Agreements (TIEAs).

As jurisdictions have moved into the implementation stage, some questions of interpretation have arisen. In the interests of consistent implementation and certainty for both tax administrations and taxpayers, the Inclusive Framework on BEPS has issued guidance to address certain key questions. This guidance is periodically updated.

July 27, 2017 in BEPS, OECD | Permalink | Comments (0)

Tuesday, July 18, 2017

Mauritius signs the multilateral BEPS Convention to tackle tax avoidance by multinational enterprises

Mahess Rawoteea of the Ministry of Finance and Economic Development of Mauritius, signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the MLI) in the presence of Douglas Frantz, OECD Deputy Secretary-General.

Based on expressed reservations at this point in time, 23 tax treaties would be impacted by this signing. We note that Mauritius issued a statement today, reaffirming its commitment to OECD implement the minimum standards developed in the course of the OECD/G20 BEPS Project into its entire tax treaty network by the end of 2018. Mauritius has committed to modify its remaining tax treaties through bilateral negotiations. 

The  MLI is a legal instrument designed to prevent base erosion and profit shifting (BEPS) by multinational enterprises. BEPS refers to tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations. The MLI allows jurisdictions to transpose results from the OECD/G20 BEPS Project, including minimum standards to implement in tax treaties to prevent treaty abuse and “treaty shopping”, into their existing networks of bilateral tax treaties in a quick and efficient manner. It was developed through inclusive negotiations involving more than 100 countries and jurisdictions, under a mandate delivered by G20 Finance Ministers and Central Bank Governors at their February 2015 meeting.

The OECD is the depositary of the MLI and is supporting governments in the process of signature, ratification and implementation. The 69 jurisdictions participating in the MLI and the position of each Party and Signatory under the Convention are available on the OECD website.

The text of the MLI, the explanatory statement and background information are available at: oe.cd/mli.

July 18, 2017 in BEPS, OECD | Permalink | Comments (0)

Monday, July 17, 2017

Public comments published on the BEPS discussion draft on the Implementation Guidance on Hard-to-Value Intangibles

On 23 May 2017, interested parties were invited to provide comments on a discussion draft that provides guidance on the implementation of the approach to pricing transfers of hard-to-value intangibles described in Chapter VI of the Transfer Pricing Guidelines. The OECD is grateful to the commentators for their input and now publishes the public comments received.

Download Public-comments-received-on-the-Implementation-Guidance-on-Hard-to-Value-Intangibles-2017

July 17, 2017 in BEPS, OECD | Permalink | Comments (0)

Saturday, July 15, 2017

Barbados joins the OECD Inclusive Framework on BEPS

Barbados has become the 101st jurisdiction to join the Inclusive Framework on BEPS ("IF"). The IF was established in January 2016, after the G20 Leaders urged the timely OECDimplementation of the BEPS package released in October 2015 and called on the OECD to develop a more inclusive framework with the involvement of interested non-G20 countries and jurisdictions, including developing economies. The first progress report produced by the Inclusive Framework will be published tomorrow.

By joining the Inclusive Framework, Barbados will work on an equal footing with all other Inclusive Framework members on the implementation of the BEPS package and on developing further standards to address the remaining BEPS issues. The full list of members of the IF can be found at: www.oecd.org/tax/beps/inclusive-framework-on-beps-composition.pdf

Barbados has a long experience in working on international tax matters having joined the Global Forum on Transparency and Exchange of Information for Tax Purposes in September 2009 and having received a "Largely Compliant" rating in 2016, as well as having ratified the Multilateral Convention on Mutual Administrative Assistance in Tax Matters in 2016, which now has includes over 110 countries and jurisdictions, and having signed the CRS Multilateral Competent Authority Agreement‎ (CRS MCAA), to enable it to fulfil its commitment to implementing the automatic exchange of financial account information pursuant to the OECD/G20 Common Reporting Standard (CRS) in time to commence exchanges in 2018.

July 15, 2017 in BEPS, OECD | Permalink | Comments (0)

Thursday, July 13, 2017

French Court Finds Google Does Not Have a French Permanent Establishment. Spares $1.2 Billion Tax Bill.

La société irlandaise Google Ireland Limited (GIL), filiale du groupe américain Google Inc., commercialise, en France notamment, un service payant d’insertion d’annonces publicitaires en ligne, « AdWords », corrélé au moteur de recherche Google.

La société française Google France (GF), également contrôlée par Google Inc., fournit, aux termes d’un contrat conclu avec GIL, assistance commerciale et conseil à la clientèle française de GIL, constituée d’annonceurs ayant souscrit à son service « AdWords ».

La société GIL contestait les redressements fiscaux dont elle avait fait l’objet en matière d’impôt sur les sociétés, retenue à la source, TVA, cotisation minimale de taxe professionnelle et cotisation sur la valeur ajoutée des entreprises, à raison des prestations de publicité qu’elle facture à ses clients français.

Le tribunal administratif a donné raison à la société GIL en prononçant la décharge des impositions contestées.

S’agissant de l’impôt sur les sociétés et de la retenue à la source, l’administration fiscale s’était fondée sur l’alinéa 9-c de l’article 2 de la convention fiscale franco-irlandaise qui prévoit l’imposition en cas de présence d’un établissement stable en France. Le tribunal a jugé que GIL ne disposait pas en France, en la personne morale de GF, d’un tel établissement stable. En effet, l’existence d’un tel établissement stable est subordonnée à deux conditions cumulatives : la dépendance de GF vis-à-vis de GIL et le pouvoir de GF d’engager juridiquement GIL. Or,  le tribunal a estimé que GF ne pouvait engager juridiquement GIL car les salariés de GF ne pouvaient procéder eux-mêmes à la mise en ligne des annonces publicitaires commandées par les clients français, toute commande devant en dernier ressort faire l’objet d’une validation de GIL.

S’agissant de la TVA, la jurisprudence communautaire soumet l’imposition à l’existence d’une structure apte, du point de vue de l'équipement humain et technique, à réaliser des prestations de manière autonome. Le tribunal a jugé que tel n’était pas le cas de GF, qui ne disposait ni des moyens humains (le personnel de GF n’a pas le pouvoir de mettre en ligne les annonces publicitaires commandées par les clients français), ni des moyens techniques (absence, notamment, de serveurs en France) la rendant à même de réaliser les prestations de publicité en cause.

S’agissant de la cotisation minimale de taxe professionnelle et de la cotisation sur la valeur ajoutée des entreprises, le tribunal a jugé que GIL ne disposait en France d’aucune immobilisation corporelle placée sous son contrôle, utilisable matériellement pour la réalisation des prestations de publicité litigieuses. Il a, en effet, estimé que les locaux de GF étaient utilisés pour les besoins de sa propre activité d’assistance et de conseil et que son matériel informatique ne permettait pas à lui seul la réalisation des prestations publicitaires de GIL en France.

French Revenue Official Statement:  Download French Revenue Authority statement

see Google, France Tax Raid, and Texas Hold'em

Court webpage

      > Lire le jugement n°1505113/1-1  du 12 juillet 2017 

      > Lire le jugement n°1505126/1-1  du 12 juillet 2017

     > Lire le jugement n°1505147/1-1 du 12 juillet 2017                                                    

      > Lire le jugement n°1505165/1-1  du 12 juillet 2017

      > Lire le jugement n°1505178/1-1  du 12 juillet 2017

  1. Download 1505113 RS
  2. Download 1505126 CVAE
  3. Download 1505147 CMTP
  4. Download 1505165 TVA
  5. Download 1505178 IS

ZDNET analysis (best of the media)

Bloomberg analysis

Guardian analysis

 

 

July 13, 2017 in BEPS, Tax Compliance | Permalink | Comments (0)

Wednesday, July 12, 2017

OECD contends strong progress seen on international tax transparency

Tax evasion continues to challenge governments in developing and developed countries alike, depriving them of resources that would otherwise be available to support sustainable OECDdevelopment through investments in infrastructure, health and other common goods. While globalisation has brought many opportunities and advances, its dark side has included the greater ease with which individuals can shift income and assets offshore and out of sight of tax authorities.

The OECD-hosted Global Forum on Transparency and Exchange of Information for Tax Purposes has been working to enhance global tax transparency, end banking secrecy and protect public finances by curtailing tax evasion since 2008. It has developed a series of international tax transparency standards and constantly monitors and reviews implementation and adhesion by its 142 members. It is part of the international efforts on tax transparency that also include the OECD/G20 BEPS Initiative.

In July 2016, G20 countries called on the Global Forum to devise objective criteria to identify jurisdictions that have not made sufficient progress toward a satisfactory level of implementation of the agreed international standards. These include those on Exchange of Information on Request (EOIR) and Automatic Exchange of Information (AEOI).

A list of non-cooperative jurisdictions was to be prepared for the G20 Leaders Summit in Hamburg in July 2017, with jurisdictions needing to meet at least two of the three benchmarks to avoid inclusion:

i.         at least a “Largely Compliant” rating with respect to the Exchange Of Information on Request standard;

ii.        a commitment to implement the Automatic Exchange Of Information standard, with first exchanges in 2018 (with respect to the year 2017) at the latest; and

iii.       Participation in the Multilateral Convention on Mutual Administrative Assistance on Tax Matters or a sufficiently broad exchange network permitting both EOIR and AEOI. 

In addition, an overriding criterion applies in the case where a jurisdiction is determined by the Global Forum peer review process to be “non-compliant”, or is blocked from moving past Phase 1 of the EOI standard, or where it was previously blocked from moving past Phase 1 and has not yet received an overall rating under the Phase 2 process.

The Global Forum established a Fast-Track review process to evaluate continuing efforts by some jurisdictions to meet transparency standards in the run-up to the G20 Summit.  The latest results of the Fast Track review show that progress has now been made by most jurisdictions in meeting the international tax transparency standards.

Fifteen jurisdictions which previously had a less than satisfactory rating on their peer reviews against the EOIR standard, were evaluated to assess whether recent progress would upgrade their rating if they were to be reviewed again.

Following the evaluation, the Global Forum assigned the following provisional ratings:

Largely Compliant - Andorra, Antigua and Barbuda, Costa Rica, Dominica, the Dominican Republic, Guatemala, the Federated States of Micronesia, Lebanon, Nauru, Panama, Samoa, the United Arab Emirates and Vanuatu.

Partially Compliant -  Marshall Islands.

Trinidad and Tobago, which previously had a rating of Non-Compliant, was unable to demonstrate progress to warrant any upgrade to its rating.   

Applying the objective criteria, and taking into account the fast track reviews, Trinidad and Tobago has been identified as the only jurisdiction which has not yet made sufficient progress towards satisfactory implementation of the tax transparency standards. Discussions are continuing with Trinidad and Tobago, and progress is anticipated soon.

The Global Forum’s fast track process was a rigorous process and informed by peer input but does not substitute a full peer review. In all cases a full review will be carried out and a peer evaluation done against the revised international standard for exchange of information on request, which now includes the requirement of beneficial ownership.

The provisional ratings reflect the strong progress made by the jurisdictions in implementing the EOIR Standard. A number of critical changes have been introduced by the reviewed jurisdictions, including the elimination of strict bank secrecy and bearer shares, improved access to accounting records and a more rigorous oversight and enforcement of obligations to maintain information. Further progress has also been achieved on expanding the breadth of the exchange networks including signature of the Multilateral Convention on Mutual Administrative Assistance on Tax Matters.

These fast track results mark the end of the first round of EOIR peer reviews, and will be delivered to the G20 Leaders Summit on 7-8 July 2017 in Hamburg, Germany. A second round of peer reviews is now underway, with the first outcomes to be released later this year. Jurisdictions which benefited from fast track will be reviewed early in the second round review process.

A Background Note on continuing progress on tax transparency is available at: http://www.oecd.org/tax/transparency/brief-and-FAQ-on-progress-on-tax-transparency.pdf

July 12, 2017 in BEPS, OECD | Permalink | Comments (0)

Tuesday, July 11, 2017

OECD releases the draft contents of the 2017 update to the OECD Model Tax Convention

The OECD Committee on Fiscal Affairs has just released the draft contents of the 2017 update to the OECD Model Tax Convention prepared by the OECDCommittee's Working Party 1. The update has not yet been approved by the Committee on Fiscal Affairs or by the OECD Council, although, as noted below, significant parts of the 2017 update were previously approved as part of the BEPS Package.  It will be submitted for the approval of the Committee on Fiscal Affairs and of the OECD Council later in 2017. This draft therefore does not necessarily reflect the final views of the OECD and its member countries.

Comments are requested at this time only with respect to certain parts of the 2017 update that have not previously been released for comments. These changes are as follows:

  • Changes to paragraph 13 of the Commentary on Article 4 related to the issue whether a house rented to an unrelated person can be considered to be a “permanent home available to” the landlord for purposes of the tie-breaker rule in Article 4(2) a).
  • Changes to paragraphs 17 and 19 of, and the addition of new paragraph 19.1 to, the Commentary on Article 4. These changes are intended to clarify the meaning of “habitual abode” in the tie-breaker rule in Article 4(2) c).
  • The addition of new paragraph 1.1 to the Commentary on Article 5. That paragraph indicates that registration for the purposes of a value added tax or goods and services tax is, by itself, irrelevant for the purposes of the application and interpretation of the permanent establishment definition.
  • Deletion of the parenthetical reference “(other than a partnership)” from subparagraph 2 a) of Article 10, which is intended to ensure that the reduced rate of source taxation on dividends provided by that subparagraph is applicable in the case where new Article 1(2) would have the effect that a dividend paid to a transparent entity would be considered to be income of a resident of a Contracting State because it is taxed either in the hands of the entity or in the hands of the members of that entity. That deletion is accompanied by new paragraphs 11 and 11.1 of the Commentary on Article 10.

Comments are not requested with respect to changes to the OECD Model Tax Convention that have been approved as part of the BEPS Package, were foreseen as part of the follow-up work on the treaty-related BEPS measures and/or were previously released for comments. These changes — which are released for information — include the following:

As part of the 2017 update, a number of changes and additions will also be made to the observations, reservations and positions of OECD member countries and non-member economies. These changes and additions are in the process of being formulated and will be included in the final version of the 2017 update.

Comments should be sent electronically in Word format by 10 August 2017 to taxtreaties@oecd.org. Comments should be addressed to the Tax Treaties, Transfer Pricing and Financial Transactions Division, OECD/CTPA.

All responses to this consultation document will be made publicly available. Responses submitted in the name of a collective “grouping” or “coalition”, or by any person submitting responses on behalf of another person or group of persons, should identify all enterprises or individuals who are members of that collective group, or the person(s) on whose behalf the commentator(s) are acting.

July 11, 2017 in BEPS, OECD | Permalink | Comments (0)

Monday, July 10, 2017

OECD releases latest updates to the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations

Today, the OECD releases the 2017 edition of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations.

The OECD Transfer Pricing Guidelines provide guidance on the application of the “arm’s length principle”, which represents the international consensus on the valuation, for income tax purposes, of cross-border transactions between associated enterprises. In today’s economy where multinational enterprises play an increasingly prominent role, transfer pricing continues to be high on the agenda of tax administrations and taxpayers alike. Governments need to ensure that the taxable profits of MNEs are not artificially shifted out of their jurisdiction and that the tax base reported by MNEs in their country reflects the economic activity undertaken therein and taxpayers need clear guidance on the proper application of the arm’s length principle.

The 2017 edition of the Transfer Pricing Guidelines mainly reflects a consolidation of the changes resulting from the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project. It incorporates the following revisions of the 2010 edition into a single publication:

  • The substantial revisions introduced by the 2015 BEPS Reports on Actions 8-10 Aligning Transfer Pricing Outcomes with Value Creation and Action 13 Transfer Pricing Documentation and Country-by-Country Reporting. These amendments, which revised the guidance in Chapters I, II, V, VI, VII and VIII, were approved by the OECD Council and incorporated into the Transfer Pricing Guidelines in May 2016;
  • The revisions to Chapter IX to conform the guidance on business restructurings to the revisions introduced by the 2015 BEPS Reports on Actions 8-10 and 13. These conforming changes were approved by the OECD Council in April 2017;
  • The revised guidance on safe harbours in Chapter IV. These changes were approved by the OECD Council in May 2013; and
  • Consistency changes that were needed in the rest of the OECD Transfer Pricing Guidelines to produce this consolidated version of the Guidelines. These consistency changes were approved by the OECD's Committee on Fiscal Affairs on 19 May 2017.

In addition, this edition of the Transfer Pricing Guidelines include the revised Recommendation of the OECD Council on the Determination of Transfer Pricing between Associated Enterprises [C(95)126/FINAL]. The revised Recommendation reflects the relevance to tackle BEPS and the establishments of the Inclusive Framework on BEPS. It also strengthens the impact and relevance of the Guidelines beyond the OECD by inviting non-OECD members to adhere to the Recommendation. Finally, it includes a delegation by the OECD Council to the Committee on Fiscal Affairs of the authority to approve by consensus future amendments to the Guidelines which are essentially of a technical nature.

To read the full version online: www.oecd.org/tax/transfer-pricing/oecd-transfer-pricing-guidelines-for-multinational-enterprises-and-tax-administrations-20769717.htm

Practical Guide to U.S. Transfer Pricing is updated annually to help multinationals cope with the U.S. transfer pricing rules and procedures, taking into account the international norms established by the Organisation for Economic Co-operation and Development (OECD). It is also designed for use by tax administrators, both those belonging to the U.S. Internal Revenue Service and those belonging to the tax administrations of other countries, and tax professionals in and out of government, corporate executives, and their non-tax advisors, both American and foreign.  Fifty co-authors contribute subject matter expertise on technical issues faced by tax and risk management counsel.  Free download of chapter 2 here

July 10, 2017 in BEPS, OECD | Permalink | Comments (0)

Saturday, July 1, 2017

IRS Launches Transfer Pricing Country-by-Country Reporting Pages To Collect and Share U.S. Multinational Tax Information

The Internal Revenue Service launched Country-by-Country Reporting pages to share U.S. multinationals financial and tax information in a key performance/profilt level indicators XMS format with foreign countries in which the companies have a business connection, such as sales or licensing.  Thus foreign countries will be able to quickly open transfer pricing audits on the U.S. companies.  

These IRS pages provide background information on Country-by-Country Reporting, frequently asked questions and other helpful resources, including a list of jurisdictions that have concluded Competent Authority Arrangements with the United States.

Country-by-Country (CbC) Reporting is part of Action 13 of the Organisation for Economic Cooperation and Development’s Base Erosion and Profit Shifting project, which is intended to enhance transparency for tax administrations by providing them with information to conduct high-level transfer pricing risk assessments.

As part of the United States’ CbC Reporting, U.S. parent entities of multinational enterprise (MNE) groups with $850 million or more of revenue in the relevant preceding annual reporting period will file Form 8975 and Schedules A (Form 8975) (i.e. the "CbC Report") with their annual income tax return. The CbC Reporting web pages contain helpful information and links to Guidance and Resources for U.S. MNE groups on CbC Reporting, including the final regulations, Rev. Proc. 2017-23 on filing for early reporting periods, and the forms and instructions.

The U.S. Competent Authority intends to enter into bilateral Competent Authority Arrangements (CAAs) for the automatic exchange of CbC Reporting information with Competent Authorities in Inclusive Framework jurisdictions with which the U.S. has an income tax treaty or tax information exchange agreement that allows for the automatic exchange of information provided the United States determines that the jurisdiction has in place appropriate safeguards with respect to confidentiality and use of the information exchanged.  A U.S. MNE’s CbC report will be exchanged pursuant to these CAAs if the U.S. MNE group has a constituent entity in the foreign jurisdiction. 

The CbC Reporting website provides an up-to-date Country-by-Country Reporting Jurisdiction Status Table listing the CAAs that have been signed for CbC Reporting.  Where jurisdictions agree that the text of a CAA can be made public, links to the text are included in the Table.

In addition, the CbC Reporting pages also provide:

  • A list of CbC Reporting frequently asked questions (FAQs)  and a link that allows for the submission of comments and questions to the IRS CbC Reporting Mailbox (mailto:lbi.cbc@irs.gov). The IRS will review comments and questions submitted and make updates to the CbC Reporting FAQs as appropriate.
  • A link to sign up for the CbC Reporting Newsletter, which will be sent out periodically with CbC Reporting-related updates and information
  • Instructions to Report Unauthorized Use for suspected unauthorized disclosure or misuse of information exchanged with a treaty/TIEA partner
Form 8975 Country-by-Country Report Filing Rules
  • Must be filed for the U.S. MNE group’s first reporting period in the tax year that starts on or after June 30, 2016.
  • Must be filed with the income tax return of the parent entity in which the reporting period ends and cannot be filed as a stand-alone return.
  • Can be filed for reporting periods that begin before the first required reporting period. (For more information see Revenue Procedure 2017-23)
  • Form 8975 and its schedules can be filed in the Modernized e-File (MeF) XML schema format.
  • Parent entities not permitted to file returns electronically must file Form 8975 with their paper income tax return.
IInternational Exchange of Country-by-Country Report
  • The IRS will exchange Form 8975 information automatically with tax authorities with which the United States enters into a bilateral Competent Authority Arrangement. However, a U.S. MNE group’s information will only be exchanged with those countries in which the U.S. MNE group reports doing business.
  • Exchanged information is confidential and protected pursuant to the applicable legal instrument permitting exchange.
  • Find out how to report concerns over potential disclosure or misuse of information exchanged under an international agreement.

July 1, 2017 in BEPS, OECD | Permalink | Comments (0)

Wednesday, June 28, 2017

The Platform for Collaboration on Tax delivers a toolkit to help developing countries address the lack of comparables for transfer pricing analyses and better understand mineral product pricing practices

The Platform for Collaboration on Tax (PCT) – a joint initiative of the International Monetary Fund (IMF), Organisation for Economic Co-operation Platform for Coop Taxand Development (OECD), United Nations (UN) and World Bank Group – has published a toolkit to provide practical guidance to developing countries to better protect their tax bases.

The toolkit responds to a request by the Development Working Group of the G20, and addresses an area of tax called "transfer pricing," which refers to the prices corporations use when they make transactions between members of the same group. How these prices are set has significant relevance for the amount of tax an individual government can collect from a multinational enterprise.

The toolkit, "Addressing Difficulties in Accessing Comparables Data for Transfer Pricing Analyses", specifically addresses the ways developing countries can overcome a lack of data needed to implement transfer pricing rules. This data is needed to determine whether the prices the enterprise uses accord with those which would be expected between independent parties. The guidance will also help countries set rules and practices that are more predictable for business.

Since the pricing of transactions between related parties in the extractive industries is an issue of particular relevance to many developing countries, the toolkit also addresses the information gaps on prices of minerals sold in an intermediate form (such as concentrates).

The toolkit is part of a series of reports by the Platform to help developing countries design or administer strong tax systems. Previous reports have covered tax incentives and external support for building tax capacity in developing countries.

The delivery of the toolkit coincides with the third meeting of the Inclusive Framework on Base Erosion and Profit Shifting (BEPS), held in the Netherlands on 21-22 June 2017, and demonstrates the commitment of the Platform partners to work together to tackle a wide range of pressing tax issues.

The toolkit has been updated following comments on a consultation draft which was made public in January 2017. It will soon also be available in French and Spanish.

For more information on the PCT, visit: www.worldbank.org/en/programs/platform-for-tax-collaboration

Queries should be directed to:

June 28, 2017 in BEPS, OECD, World Bank | Permalink | Comments (0)

Tuesday, June 27, 2017

New head appointed for OECD transfer pricing unit

Mr. Tomas Balco has been appointed Head of the Transfer Pricing Unit in the Centre for Tax Policy and Administration. He will take up his duties on 4 September 2017.

A Czech and Slovak national, Tomas has been working at Slovak Republic’s Ministry of Finance since 2014, where he served as General Counsel and was Tomas Balco OECD TPheading the International Tax Unit and the transfer pricing team. In this capacity he played a key role in the tax policy area of the Slovak Presidency of the EU Council - SK PRES 2016. Prior to that, Tomas was a professor at Kimep University and visiting professor and lecturer at other Universities in Europe as well as at the African Tax Institute at University of Pretoria and the Director of the Central Asian Tax Research Center in Kazakhstan. He has also held positions with Deloitte and PricewaterhouseCoopers, the International Bureau of Fiscal Documentation, the International Tax Units of the governments of the Czech Republic and Chile, and the European Commission’s DG-TAXUD.

Tomas holds law degrees from Masaryk University in Brno and Vienna University of Economics and Business (WU). He also qualified as a Chartered Certified Accountant and is a Fellow of ACCA.

He has been a participant in the work of the UN Committee of Experts on International Taxation, and as a tax policy and capacity building expert he has also worked with Ministries of Finance and Tax Administrations in Europe, Central Asia and Africa.

June 27, 2017 in BEPS, OECD | Permalink | Comments (0)

Sunday, June 25, 2017

OECD releases BEPS discussion drafts on transactional profit splits

Public comments are invited on the following discussion drafts:

  • Revised Guidance on Profit Splits, which deals with work in relation to Actions 8-10 ("Assure that transfer pricing outcomes are in line with value creation") of the BEPS Action Plan.

Discussion Draft on the Revised Guidance on Profit Splits

Action 10 of the BEPS Action Plan invited clarification of the application of transfer pricing methods, in particular the transactional profit split method, in the context of global value chains. 

Under this mandate, this revised discussion draft replaces the draft released for public comment in July 2016. Building on the existing guidance in the OECD OECD Transfer Pricing Guidelines, as well as comments received on the July 2016 draft, this revised draft is intended to clarify the application of the transactional profit split method, in particular, by identifying indicators for its use as the most appropriate transfer pricing method, and providing additional guidance on determining the profits to be split. The revised draft also includes a number of examples illustrating these principles.  While comments are invited on any aspect of the revised draft, the document also identifies a number of issues relating to the application of the profit split method on which feedback is particularly sought.

Deadline for submitting public comments on the discussion drafts

Interested parties are invited to send their comments on these discussion drafts. Comments should be sent by 15 September at the latest by e-mail to TransferPricing@oecd.org in Word format (in order to facilitate their distribution to government officials).

All comments received on these discussion drafts will be made publicly available. Comments submitted in the name of a collective “grouping” or “coalition”, or by any person submitting comments on behalf of another person or group of persons, should identify all enterprises or individuals who are members of that collective group, or the person(s) on whose behalf the commentator(s) are acting.


Public Consultation

The OECD intends to hold a public consultation on the additional guidance on the attribution of profits to permanent establishments and on the revised guidance on the transactional profit split method in November 2017 at the OECD Conference Centre in Paris, France. Registration details for the public consultation will be published on the OECD website in September. Speakers and other participants at the public consultation will be selected from among those providing timely written comments on the respective discussion drafts.

June 25, 2017 in BEPS, OECD | Permalink | Comments (0)

Saturday, June 24, 2017

OECD releases BEPS discussion drafts on attribution of profits to permanent establishments

Public comments are invited on the following discussion drafts:

Release of a discussion draft containing Additional Guidance on
Attribution of Profits to Permanent Establishments

The Report on Action 7 of the BEPS Action Plan (Preventing the Artificial Avoidance of Permanent Establishment Status) mandated the development OECDof additional guidance on how the rules of Article 7 of the OECD Model Tax Convention would apply to PEs resulting from the changes in the Report, in particular for PEs outside the financial sector. The Report indicated that there is also a need to take account of the results of the work on other parts of the BEPS Action Plan dealing with transfer pricing, in particular the work related to intangibles, risk and capital. Importantly, the Report explicitly stated that the changes to Article 5 of the Model Tax Convention do not require substantive modifications to the existing rules and guidance on the attribution of profits to permanent establishments under Article 7 (see paragraph 19-20 of the Report).

Under this mandate, this new discussion draft has been developed which replaces the discussion draft published for comments in July 2016. This new discussion draft sets out high-level general principles outlined in paragraph 1-21 and 36-42 for the attribution of profits to permanent establishments in the circumstances addressed by the Report on BEPS Action 7. Importantly, countries agree that these principles are relevant and applicable in attributing profits to permanent establishments. This discussion draft also includes examples illustrating the attribution of profits to permanent establishments arising under Article 5(5) and from the anti-fragmentation rules in Article 5(4.1) of the OECD Model Tax Convention.

Please note that comments are not sought on the 2016 Discussion Draft or on the changes to the PE definitions that have been agreed under Action 7 and which were published in the 2015 Final Report, "Preventing the Artificial Avoidance of Permanent Establishment Status." Commentators should concentrate solely on the proposed guidance in this discussion draft on the application of Article 7 to determine the attribution of profits to permanent establishments.

Deadline for submitting public comments on the discussion drafts

Interested parties are invited to send their comments on these discussion drafts. Comments should be sent by 15 September at the latest by e-mail to TransferPricing@oecd.org in Word format (in order to facilitate their distribution to government officials).

All comments received on these discussion drafts will be made publicly available. Comments submitted in the name of a collective “grouping” or “coalition”, or by any person submitting comments on behalf of another person or group of persons, should identify all enterprises or individuals who are members of that collective group, or the person(s) on whose behalf the commentator(s) are acting.


Public Consultation

The OECD intends to hold a public consultation on the additional guidance on the attribution of profits to permanent establishments and on the revised guidance on the transactional profit split method in November 2017 at the OECD Conference Centre in Paris, France. Registration details for the public consultation will be published on the OECD website in September. Speakers and other participants at the public consultation will be selected from among those providing timely written comments on the respective discussion drafts.

June 24, 2017 in BEPS, OECD | Permalink | Comments (0)

Friday, June 23, 2017

Third OECD meeting of the Inclusive Framework on BEPS

Over 200 delegates from 83 countries and jurisdictions as well as 12 international and regional organisations met in Noordvijk, The Netherlands for the Third Meeting of the Inclusive Framework on Base Erosion and Profit Shifting (BEPS). The meeting welcomed Viet Nam as its newest and 100th member and discussed and approved its first monitoring report, which will be submitted to G20 Leaders for their summit to be held on 7-8 July 2017 in Hamburg. The report highlights the progress that has been achieved since the Inclusive Framework first met in Kyoto in June 2016. The meeting also approved the release of discussion drafts on Attribution of Profits to Permanent Establishments and Transactional Profit Splits.

Furthermore, as part of continuing efforts to boost transparency by multinational enterprises (MNEs), Belize, the Cayman Islands, Colombia, Haiti, Pakistan, Singapore and the Turks and Caicos Islands signed the Multilateral Competent Authority Agreement for Country-by-Country Reporting (CbC MCAA), bringing the total number of signatories to 64.

Third meeting of the Inclusive Framework on BEPS

The CbC MCAA is an efficient mechanism that allows signatories to bilaterally and automatically exchange Country-by-Country Reports with each other, as contemplated by Action 13 of the BEPS Action Plan. It will help ensure that tax administrations obtain a better understanding of how MNEs structure their operations, while also ensuring that the confidentiality and appropriate use of such information is safeguarded. At present, over 800 bilateral exchange relationships have been put in place for the exchange of Country-by-Country Reports.

At the same time, the United States concluded a further set of bilateral competent authority arrangements for the automatic exchange of Country-by-Country Reports. It now has arrangements in place with Canada, Denmark, Guernsey, Iceland, Ireland, Korea, Latvia, the Netherlands, New Zealand, Norway, the Slovak Republic and South Africa, thereby reaffirming the strong commitment of the United States to start the automatic exchange of Country-by-Country Reports in 2018. The United States Competent Authority continues to negotiate with a significant number of jurisdictions and anticipates concluding additional competent authority arrangements in the immediate future.

At the signing ceremony, Singapore also signed the Multilateral Competent Authority Agreement for the Common Reporting Standard‎ (CRS MCAA), re-confirming its commitment to implementing the automatic exchange of financial account information pursuant to the OECD/G20 Common Reporting Standard (CRS) in time to commence exchanges in 2018. Singapore is the 92nd jurisdiction to sign the CRS MCAA.

The meeting also discussed the toolkits under development by the Platform for Collaboration on Tax, including the toolkit on Comparables released today.

Finally, the meeting also included a special session with representatives from TUAC, the BIAC Tax Committee, and civil society.

June 23, 2017 in BEPS, OECD | Permalink | Comments (0)

Thursday, June 22, 2017

EU to Require Tax Planners To Report Tax Plans and Clients for AEoI Across All EU Each 3 Months

The European Commission has today proposed tough new transparency rules for intermediaries - such as tax advisors, accountants, banks and lawyers - who design and promote tax planning schemes for their clients.  Read the text of the proposal and the annex

What tax planning arrangements will have to be reported?

Intermediaries will have to report any cross-border arrangement that contains one or more of the 'hallmarks' listed in the proposal. These hallmarks EU Councilare features or characteristics in a transaction that could potentially enable tax avoidance or abuse. Examples of these hallmarks include arrangements which:

  • involve a cross-border payment to a recipient resident in a no-tax country;
  • involve a jurisdiction with inadequate or weakly enforced anti-money laundering legislation;
  • are set up to avoid reporting income as required under EU transparency rules;
  • circumvent EU information exchange requirements for tax rulings;
  • have a direct correlation between the fee charged by the intermediary and what the taxpayer will save in tax avoidance;
  • ensure that the same asset benefits from depreciation rules in more than one country;
  • enable the same income to benefit from tax relief in more than one jurisdiction;
  • do not respect EU or international transfer pricing guidelines.

The full list of hallmarks is annexed to the proposal. Once it is agreed, intermediaries will need to be familiar with the full set of hallmarks in the legislation to ensure that they meet their reporting obligations fully.

Recent media leaks such as the Panama Papers have exposed how some intermediaries actively assist companies and individuals to escape taxation, usually through complex cross-border schemes. Today's proposal aims to tackle such aggressive tax planning by increasing scrutiny around the previously-unseen activities of tax planners and advisers.

Will the new reporting and information exchange requirements create new burdens for the industry?

The reporting requirements are conceived to avoid creating undue burdens on the industry. For the reports to tax authorities, intermediaries can re-use summaries that they prepare for their clients on the tax planning arrangements. The proposal also respects national rules on professional privileges and secrets. In these cases, the intermediary is no longer obliged to report and intermediaries who are not based in the EU get a waiver from reporting. To prevent loopholes in these two cases, the obligation to report is shifted to the taxpayer.

Although the new rules do not set a minimum threshold for disclosure, the hallmarks for reporting usually point to high-risk situations that involve elaborate arrangements. Small companies and individuals (unless particularly wealthy) would not normally have the resources to seek out sophisticated tax advice. So, by effect, it can be assumed that the reporting obligation would mostly affect – where there is a shift in the liability – big corporate taxpayers or very wealthy individuals.

Member States which already operate mandatory disclosure rules have not noted a negative impact on the industry as a result of the transparency requirements. In fact, the UK is one of the few Member States to have such legislation for intermediaries, and yet it still has one of the highest number of intermediaries in the EU.

How would the proposed measures work in practice?

Intermediaries will have to report any cross-border tax planning arrangement that they design or promote if it bears any of the features or "hallmarks" defined in the Directive. They must make this report to their tax authorities within five days of giving such an arrangement to their client. Member States must ensure proper penalties are in place for intermediaries that fail to meet these reporting requirements.

The Member State to whom the arrangements are reported must automatically share this information with all other Member States on a quarterly basis through a centralised database. There will be a standard format for the exchange of this information, which will include details on the intermediary, the tax payer(s) involved and features of the tax scheme, amongst other information.

The Commission will have access to certain aspects of the information exchanged between Member States, so that it can monitor the implementation of the rules.

Which intermediaries are covered by the proposal?

The proposal has a very wide scope, covering all intermediaries and all types of direct taxes (income, corporate, capital gains, inheritance, etc.).

Any company or professional that designs or promotes a tax planning arrangement which has a cross-border element and contains any of the hallmarks set out in the proposed Directive will be covered. This includes lawyers, accountants, tax and financial advisors, banks and consultants.

What happens if the intermediary is based in a non-EU country?

EU legislation cannot be extended to cover intermediaries that are not based in the EU. It would be impossible to enforce compliance with the rules or to sanction non-compliance of intermediaries without sufficient presence in the EU. Therefore, if the intermediary is not located in the EU or is bound by professional privilege or secrecy rules (see below), the obligation to report the tax arrangement passes to the EU-based taxpayer instead.

Cross-border tax planning schemes bearing certain characteristics or 'hallmarks' which can result in losses for governments will now have to be automatically reported to the tax authorities before they are used. The Commission has identified key hallmarks, including the use of losses to reduce tax liability, the use of special beneficial tax regimes, or arrangements through countries that do not meet international good governance standards.

The obligation to report a cross-border scheme bearing one or more of these hallmarks will be borne by:

  • the intermediary who supplied the cross-border scheme for implementation and use by a company or an individual;
  • the individual or company receiving the advice, when the intermediary providing the cross-border scheme is not based in the EU, or where the intermediary is bound by professional privilege or secrecy rules;
  • the individual or company implementing the cross-border scheme when it is developed by in-house tax consultants or lawyers. 

Member States will automatically exchange the information that they receive on the tax planning schemes through a centralised database, giving them early warning on new risks of avoidance and enabling them to take measures to block harmful arrangements. The requirement to report a scheme does not necessarily imply that it is harmful, only that it merits scrutiny by the tax authorities. However, Member States will be obliged to implement effective and dissuasive penalties for those companies that do not comply with the transparency measures, creating a powerful new deterrent for those that encourage or facilitate tax abuse.

The new rules are comprehensive, covering all intermediaries, all potentially harmful schemes and all Member States. Details of every tax scheme containing one or more hallmarks will have to be reported to the intermediary's home tax authority within five days of providing such an arrangement to a client.

Background

The Juncker Commission has made great strides in boosting tax transparency and tackling tax evasion and avoidance. New EU rules to block artificial tax arrangements, as well as new transparency requirements for financial accounts, tax rulings and multinationals' activities have already been agreed and are progressively entering into force. Proposals for stronger Anti-Money Laundering legislation, public Country-by-Country reporting requirements and tougher good governance rules for EU funds are currently being negotiated. In addition, a new EU list of non-cooperative tax jurisdictions should be ready before the end of the year.

Today's proposal will further reinforce the EU's tax transparency framework, by shedding new light on the activities of intermediaries and the tax planning arrangements being used. It will also ensure a harmonised EU approach to implementing the recommended mandatory disclosure provisions in the OECD's Base Erosion and Profit Shifting (BEPS) project, as endorsed by the G20. Last October, Member States expressed their support for a Commission proposal on these measures.

Next Steps

The proposal, which takes the form of an amendment to the Directive for Administration Cooperation (DAC), will be submitted to the European Parliament for consultation and to the Council for adoption. It is foreseen that the new reporting requirements would enter into force on 1 January 2019, with EU Member States obliged to exchange information every 3 months after that.

Background information

Read the Press Release on the proposal
Read the Memo on the proposal
Read the text of the proposal and the annex
Read the impact assessment
Read the outcome of the public consultation on intermediaries
More on Tax Transparency

Q&A on new transparency rules for intermediaries

Factsheet

DG TAXUD webpage on the new rules for tax intermediairies

June 22, 2017 in BEPS | Permalink | Comments (0)

Thursday, June 15, 2017

OECD invites taxpayer input on third batch of dispute resolution peer reviews

Improving the tax treaty dispute resolution process is a top priority of the BEPS Project. The Mutual Agreement Procedure (MAP) peer review and monitoring process under Action 14 of the BEPS Action Plan was launched in December 2016 with the peer reviews of the two first batches now well underway.

The peer review process is conducted in two stages. Under Stage 1, implementation of the Action 14 minimum standard is evaluated for Inclusive Framework members, according to the schedule of review. Stage 2 focuses on monitoring the follow-up of the recommendations resulting from jurisdictions' Stage 1 report.

The OECD is now gathering input for the Stage 1 peer reviews of the Czech Republic, Denmark, Finland, Korea, Norway, Poland, Singapore and Spain, and invites taxpayers to submit OECDinput on specific issues relating to access to MAP, clarity and availability of MAP guidance and the timely implementation of MAP agreements for each of these jurisdictions using the taxpayer input questionnaire. As taxpayers are the main users of the MAP this input is key for the review process and we encourage taxpayers to complete the questionnaire and return it to fta.map@oecd.org (in Word format) by 7 July 2017 at the latest.

For more information on the BEPS Action 14 peer review and monitoring process, see: www.oecd.org/tax/beps/beps-action-14-peer-review-and-monitoring.htm

June 15, 2017 in BEPS | Permalink | Comments (0)

Thursday, June 8, 2017

Ground-breaking multilateral BEPS convention signed at OECD will close loopholes in thousands of tax treaties worldwide

Ministers and high-level officials from 76 countries and jurisdictions have signed today or formally expressed their intention to sign an innovative multilateral convention that will swiftly implement a series of tax treaty measures to update the existing network of bilateral tax treaties and reduce opportunities for tax avoidance by multinational enterprises. The new convention will also strengthen provisions to resolve treaty disputes, including through mandatory binding arbitration, thereby reducing double taxation and increasing tax certainty.

Today’s signing ceremony marks a an important milestone in the international tax agenda, which is moving closer to the goal of preventing base erosion and profit shifting (BEPS) by multinational enterprises. The new convention, which is the first multilateral treaty of its kind, allows jurisdictions to transpose results from the OECD/G20 BEPS Project into their existing networks of bilateral tax treaties. It was developed through inclusive negotiations involving more than 100 countries and jurisdictions, under a mandate delivered by G20 Finance Ministers and Central Bank Governors at their February 2015 meeting.

“The signing of this multilateral convention marks a turning point in tax treaty history,” said OECD Secretary-General Angel Gurría. “We are moving towards rapid implementation of the far-reaching reforms agreed under the BEPS Project in more than 1,100 tax treaties worldwide, and radically transforming the way that tax treaties are modified. Beyond saving signatories from the burden of re-negotiating these treaties bilaterally, the new convention will result in more certainty and predictability for businesses and a better functioning international tax system for the benefit of our citizens. Today’s signing also shows that when the international community comes together there is no issue or challenge we cannot effectively tackle.” 

June 8, 2017 in BEPS | Permalink | Comments (0)

Monday, March 13, 2017

Draft Form 8975, Country-by-Country Report, and Schedules A, Tax Jurisdiction and Entity Financial Information for 2017 Filing

Some jurisdictions have adopted country-by-country (CbC) reporting requirements for annual accounting periods beginning on or after January 1, 2016, that would require a Irs_logoconstituent entity resident in the jurisdiction to report CbC information if the constituent entity is part of an MNE group with an ultimate parent entity resident in a jurisdiction that does not have a CbC reporting requirement (including pursuant to parent surrogate filing) for the same annual accounting period (local CbC filing). Consequently, constituent entities of a U.S. MNE group may be subject to local CbC filing for early reporting periods, unless the ultimate parent entity files a Form 8975, or reports CbC information to another jurisdiction that accepts surrogate filing, for such early reporting period. The preamble to the CbC reporting regulations indicated that the Treasury Department and the IRS would provide a procedure for ultimate parent entities of U.S. MNE groups to file Form 8975 for early reporting periods.

Thus, beginning on September 1, 2017, Form 8975 may be filed for an early reporting period with the income tax return or other return as provided in the Instructions to Form 8975 for the taxable year of the ultimate parent entity of the U.S. MNE group with or within which the early reporting period ends.

draft CbCR form 8975 here

draft Schedule A CbCR financial information 

draft instructions to complete Form 8975 and its Schedule A

An ultimate parent entity that files its return electronically must file the Form 8975 through the IRS Modernized e-File system in Extensible Markup Language (XML) format, not as a binary attachment (such as a PDF file). The IRS intends to provide specific electronic filing information on Form 8975 to the software industry in early 2017 so that developers will be able to make Form 8975 available in their software ahead of the September 1, 2017, implementation date. For filers of Form 8975 that are not eligible to use Modernized e-File to file their income tax return, a paper version of Form 8975 will be made available in advance of the September 1, 2017, implementation date.

Professor William Byrnes' Practical Guide to U.S. Transfer Pricing (LexisNexis) is a best-selling 3,000 page treatise updated annually to help multinationals cope with the U.S. transfer pricing rules and procedures, taking into account the international norms established by the Organisation for Economic Co-operation and Development (OECD). It is also designed for use by tax administrators, both those belonging to the U.S. Internal Revenue Service and those belonging to the tax administrations of other countries, and tax professionals in and out of government, corporate executives, and their non-tax advisors, both American and foreign.  Fifty co-authors contribute subject matter expertise on technical issues faced by tax and risk management counsel.  Free download of chapter 2 here

March 13, 2017 in BEPS | Permalink | Comments (0)