The International Tax Landscape

Transcription

1 and EU Tax Reforms How will Ireland, Luxembourg, Netherlands and Switzerland Reform Their Tax Systems to Comply?, Loyens & Loeff NV, PricewatershouseCoopers, PricewaterhouseCoopers 67 th Annual Tax Conference 67e Conférence fiscale annuelle 2015 The International Tax Landscape Limited autonomy of national legislator Local Country Tax Reforms Influence on international tax competitiveness Development of new rules and regulations (unilateral changes in all jurisdictions) 2

2 Impact on MNC groups Holding & repatriation Financing Transparency and disclosure BEPS Intellectual property Operating model Permanent establishment 3 ACTION 1: Address the challenges of the digital economy BEPS Action Items ACTION 2: Neutralize the effect of hybrid mismatch arrangements ACTION 3: Strengthen CFC rules ACTION 4: Limit base erosion via interest deductions and other financial payments ACTION 5: Counter harmful tax practices more effectively, taking into account transparency and substance ACTION 6: ACTION 7: ACTION 8: ACTION 9: ACTION 10: Prevent treaty abuse Prevent the artificial avoidance of PE status Assuring that TP outcomes are in line with value creation Intangibles Assuring that TP outcomes are in line with value creation Risks & Capital Assuring that TP outcomes are in line with value creation Other high-risk transactions ACTION 11: ACTION 12: ACTION 13: ACTION 14: ACTION 15: Establish methodologies to collect and analyze data on BEPS and the actions to address it Require taxpayers to disclose their aggressive tax planning arrangements Re-examine transfer pricing documentation CbCR Make dispute resolution mechanisms more effective Develop a multilateral instrument 4

3 EU is overtaking the OECD EU Parent Subsidiary Directive GAAR & Hybrid Loans EU Interest Royalty Directive - GAAR EU State Aid Transparency IP Regimes Modified Nexus CCCTB Relaunch EU TP Framework EU Code of Conduct Group Hard law 5 EU Developments Topic Details Timeline EU State Aid Fiat & Starbucks cases ruled to be EU State Aid; Amazon Apple, Belgian excess profit ruling still pending EC asked over 20 MS to submit tax rulings and recently seems to have asked for tax rulings regarding Microsoft, Pfizer, GlaxoSmithKline and Kraft Foods (press sources) Current focus on tax avoidance structures, esp. TP issues EU Parent Subsidiary Directive EU Interest Royalty Directive Introduction of new rules to benefit from Directive: GAAR Hybrid loan mismatches Introduction of GAAR rule likely Subject to tax requirement considered Effective 1 January 2016 Implementation 2017 IP Regimes: Modified Nexus Approach MS agreed to adjust IP regimes to modified nexus approach, ultimately by June 30, Grandfathering of existing regimes up to 5 years after adjustment July

4 EU Developments Topic Details Timeline Exchange of Information on Tax Rulings Tax Committee on Tax Rulings and other Measures / TAXE Council reached political agreement on mandatory automatic exchange of information on cross border tax rulings / APAs with all other MSs Semi-annually, standard format, ultimately through central directory. Full disclosure upon request May also include tax rulings and APAs issued, amended or renewed less than 5 years ago (i.e. between 2012 and 2016). EC will have access to a more limited set of information and is not allowed to use the information for other purposes (e.g. State aid) European Parliament Committee to review e.g.: tax ruling practices, the way the EC treats State Aid in MSs, transparency of MSs on their tax rulings, impact aggressive planning on public finances. Draft report with recommendations has been published; final voting within EP on 24 Nov January 2017 Exchange existing rulings prior to Dec 31, 2017 December EU Developments Topic Details Timeline CBC Reporting CBCR adopted for o.a. banks, large extractive / logging industries EC launched public consultation on public disclosure of tax information for MNEs, including rulings Draft Shareholder Rights Directive: large undertakings and public interest entities in all sectors. Above certain thresholds (a.o. net turnover 100 mio) reporting must include information on tax rulings CRS Administrative Cooperation Directive amended to include the OECD s CRS ( Global Standard ) - all MSs must now implement Proposal to repeal Savings Tax Directive 2015/ /2016 Comprise text expected early 2016 January 2016 AEOI with non-eu countries Swiss Agreement on automatic exchange of financial account information in tax matters. Includes CRS. Similar agreement for Liechtenstein concluded. Negotiations with Andorra, Monaco, San Marino underway 2017; exchange as of September 2018 UBO Registers Register in each MS on UBO s of corporate entities/other legal entities incorporated within their territory. Access for the public if legitimate interest is demonstrated. Approval 2015 Registers

5 EU Developments Topic Details Timeline EC Action Plan / CCCTB June 2015 Action Plan on corporate taxation: fair & growth friendly; tackle abuse. Five key areas: Relaunch of CCCTB that would be mandatory for MNEs.: Step by step approach: first common tax base, later consolidation & sharing mechanism Public Consultation launched to identify key measures for CCCTB Ensure taxation where profits are generated: Anti-BEPS Directive within 12 months, with legally binding, before agreement on revised CCCTB; EU transfer pricing framework Proposal in 2016 October Tax environment for business: Cross border loss offset ahead of full CCCTB; dispute resolution tools Tax transparency: Blacklist non-eu non-cooperative tax jurisdictions Consultation on public disclosure of tax information by MNEs 2015/2016 Improving coordination: Reform Code of Conduct; Cross border controlling & tax audits; 9 Switzerland & EU Developments 10 Switzerland is not a member of the EU EU law does not apply No EU State Aid Bilateral agreements with the EU Swiss EU Savings Directive GAAR Swiss Corporate Tax Reform III Exchange of information on tax rulings > EU/OECD convention on administrative assistance in tax matters already signed and implementation law currently in parliamentary discussion. Expected effective date as of 2018 for all rulings valid in 2017

6 Ireland International Tax Strategy First published in Oct 2014, updated Oct 2015 To ensure Ireland has a competitive and sustainable tax package for investors Play fair but play to win! Maintain and enhance Ireland s tax offering under 3 headings: ü Rate ü Regime ü Reputation 11 Ireland The journey to Phased out 10% incentive rate (1990 s) 12.5% statutory tax rate for trading activities (2003) 25% (refundable) R&D tax credits & started modernizing HoldCo regime (2004) 12 New onshore IP amortization regime (2010) Transfer pricing (2011) Stateless income change (2014 / 2015) Phasing out of non-treaty IRNRs (2015 / 2021)

7 Ireland Budget 2016 (Oct 2015) BEPS related commentary 12.5% rate = settled tax policy No broad range of BEPS actions Specific actions (effective ) 6.25% KDB (Knowledge Development Box) compliant with modified nexus CbCR for Irish HQ companies Parent/Sub Directive new anti-avoidance provision 13 Ireland Where does this leave Ireland now? ü 12.5% statutory tax rate ü Onshore IP amortization regime ü 25% (refundable) R&D tax credits ü 6.25% IP Box regime ü Competitive Holdco / Financing options 14

8 Luxembourg Incorporation of EU Parent Subsidiary GAAR Draft Bill amending the Luxembourg participation exemption regime submitted to the Luxembourg Parliament on August 5, 2015 Ø The Bill would implement the Directive s latest amendments, including the antihybrid provision and the European general anti-avoidance regime (GAAR) provision Ø The changes would affect the withholding tax exemption (article 147 of the Luxembourg Income Tax Law (LITL)) and dividend exemption (article 166 LITL) of the participation exemption regime. As of today, there are no propositions to update the participation exemption for capital gains and net wealth tax (NWT) Ø The Bill would adopt the European GAAR as provided by the Directive, subject to practical interpretation 15 Luxembourg Budget Bill Repeal of the Luxembourg IP regime The Budget Bill released on October 14, 2015 repeals the existing IP regime (set forth by Article 50bis of LITL and 60 bis BewG, the Old IP regime ) effective July 1, 2016 for corporate income tax / municipal business tax. The associated net wealth tax repeal takes effect January 1, 2017 Ø The repeal is designed to align the IP regime with the modified nexus approach as agreed between the EU Member States and as described in BEPS Action Item 5 of October 5, 2015 Taxpayers currently benefitting from the Old IP regime would still continue to benefit during a transitional period until June 30, 2021 New entrants may similarly benefit from the Old IP regime until June 30, 2021 for IP rights under certain conditions 16

9 Luxembourg Budget Bill Repeal of the Luxembourg IP regime For IP rights acquired after December 31, 2015 from any related party, those rights would be eligible under the Old IP regime until December 31, This provision includes IP rights acquired under any tax neutral transaction Ø Also applicable to related parties which did not previously benefit from the Old IP regime (or similar IP regime in a foreign country) at the time of the IP rights acquisition For all IP rights acquired or created after February 6, 2015, Luxembourg tax authorities would spontaneously communicate the identity of the taxpayers benefitting from the Old IP regime to the competent authorities of foreign countries The details of a new IP regime, complying with the modified nexus approach, are not described in the Budget Bill, but are expected to be announced in a separate Bill in the coming months 17 Netherlands Dutch tax system based on open economy & international business. Continue & solidify Dutch international policy within BEPS framework. Meanwhile unilateral adjustments ahead of BEPS : Substance requirements & exchange of information. Treaties with developing countries to include anti-abuse clauses. Budget 2016: EU Parent/Subsidiary Directive: GAAR: existing rules aligned with Directive text, with substance requirements for intermediary holding companies Anti-hybrid financing: via participation exemption rules Country by Country Reporting Knowledge/IP Box: adjust 2017; extended defintion IP for SME 18

10 Netherlands Dutch Government position Risk of abuse 1. (Pro)active adjustment NL rules/treaties Transfer pricing Country by Country Reporting Developing countries; - Amend tax treaties - Increase technical assistance Exchange of information on rulings 2. Coordinated action Hybrids Limitations interest deduction CFC-rules 3. Promote & solidify Dutch policy Treaty network Participation exemption No WHT on interest/royalties Certainty in advance (ATR/APA) Dispute resolution (mutual agreement/arbitration) Innovation Box Risk of unnecessary burden for real business 19 Netherlands Dutch Investment Climate going forward: Continue strong features of Dutch tax system and remain attractive for foreign investments post-beps (e.g. head offices and foreign companies with economic activity in the Netherlands). Where BEPS results in undesired or unintended burden, measures may be considered to compensate. Netherlands presidency of the EU in 2016: Work on anti-beps measures via wide legally binding EU measures & align EU measures with (further) OECD standards. Harmonization should be limited to anti-beps measures only. No (further) consolidation. EU must remain attractive for foreign investment and should not put itself at disadvantage vs. the rest of the world. 20

11 Switzerland Automatic exchange of rulings effective 2018 BEPS Analysis on OECD BEPS recommendations currently analysed by Switzerland to assess whether potential amendments of the Swiss corporate tax law in the light of the international developments should be made CbC needs legal basis for Switzerland. Currently preparing respective rules and introduction expected as per 2017 Swiss Corporate Tax Reform III Expected effectiveness Maintain international effectiveness of location Switzerland Abolishment of existing special tax regimes (mixed, holding, principal company, Swiss finance branch) Introduction of new internationally accepted measures 21 Switzerland CTR III Abolition of privileged cantonal tax regimes, principal taxation, Swiss finance branch regime Cantonal Licence Box on Patent Income R&D Input incentive Notional Interest Deduction Tax status changes ( Step-up of hidden Reserves) Cantonal Corporate income tax reduction Adaption of cantonal capital tax? Other measures Issuance stamp tax Partial taxation of private dividends Lump sum tax credit for branches Sustainable effects for Switzerland 22 High competitiveness Attractive jobs International acceptance Legal certainty & security of investment Economic benefit for everyone

12 Financing Interest deductibility (interest/ebitda ratio) Hybrid instruments Finance branches US Lux double tax treaty protocol: Potential adjustments in discussion, e.g. branch exemption BEPS: Introduction of Limitation of Benefits clauses Notional Interest Deductions US-inbound financing Interest free loans 23 Intangible Property IP R&D Incentives Front-end incentive Generally require in-country activities (not IP ownership) IP Box regimes OECD => UK/Germany => Modified Nexus EU moves to phase out all existing box regimes Transfer pricing (DEMPE) 24

13 Headquarters & Principal Structures Business model and economic rationale Substance and operational functions Group structure Transfer pricing (e.g. DEMPE for IP owners) HQ country tax treatment (deferral / exemption) Ruling regimes under scrutiny / being revised Commissionaires versus Limited Risk Distributors Permanent establishment qualification 25