1. OECD publishes 77 comments on transfer pricing guidelines for intra-group services, dispute resolution

Transcription

1 1. OECD publishes 77 comments on transfer pricing guidelines for intra-group services, dispute resolution The OECD published 77 responses to its request for suggestions on how to improve the OECD transfer pricing guidelines for multinational corporations, with 51 comments addressing OECD guidance on intra-group services and 26 comments covering transfer pricing dispute resolution. Writing on behalf of BIAC, Will Morris said the OECD s work should be coordinated with its work on the digital economy. He also said that Inclusive Framework members such as Brazil, India, and China should participate to ensure multinational implementation and uniform adoption of the rules. EY suggested that the OECD undertake to have its updated, simplified transfer pricing approach for low value-adding services adopted by Inclusive Framework members through the use of a multilateral general competent authority agreement. Consultant and former OECD transfer pricing head, Joseph Andrus, said that OECD transfer pricing guidelines need to better address the challenges faced by businesses that exist primarily to provide services to third parties. Source: 1

2 2. Landmark tax agreement to strengthen tax treaties enters into force with additional countries joining Ministers and senior officials from Kazakhstan and the United Arab Emirates have signed the BEPS Multilateral Convention bringing the total number of signatories to 79 and the number of covered jurisdictions to 81. This Convention updates the existing network of bilateral tax treaties and reduces opportunities for tax avoidance by multinational enterprises. The new signatures and the imminent entry into force of this landmark agreement underlines governments commitment to update the international tax rules and ensure they are fit for purpose in the 21st Century, said Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration. The entry into force of the Convention follows its ratification by five jurisdictions Austria, the Isle of Man, Jersey, Poland and Slovenia. Recently, Serbia, Sweden and New Zealand also deposited their instrument of ratification with the OECD, acting as the Depositary of the Convention. Over 115 countries and jurisdictions are currently working in the Inclusive Framework on BEPS to implement BEPS measures in their domestic legislation and bilateral tax treaties. Source: 2

3 3. New tax law targets corporates cross-border payments A new tax introduced as part of broader reform in the U.S. is frustrating multinational corporations, according to reports in The Wall Street Journal. The BEAT Tax, short for the Base Erosion and Anti-Abuse Tax, is designed to prevent businesses from moving their U.S. profits to other countries. The legislation applies to corporates with gross receipts of at least $500 million, reports explained, adding that banks, insurance firms and professional service companies could be hit especially hard because of the volume of cross-border payments they complete. Companies that make cross-border payments to affiliates that exceed 3 percent of total tax-deductible costs must recalculate its taxes, the publication explained. BEAT prevents businesses from taking deductions on payments to those affiliated parties across borders. Businesses must calculate taxes under BEAT and the regular tax system, then pay whichever is larger, reports said. Source: 3

4 4. OECD launches largest source of comparable tax revenue data A new database providing detailed and comparable tax revenue information for 80 countries around the world and which will expand to cover more than 90 countries by the end of 2018 was unveiled during the 5th plenary meeting of the Inclusive Framework on BEPS, held in Lima, Peru. The Global Revenue Statistics Database provides the largest public source of comparable tax revenue data, which is produced in partnership with countries and regional organizations. The database provides reliable and accessible country-specific indicators on tax levels and structures, supports global efforts to raise domestic revenues for sustainable development, contributing directly to the Sustainable Development Goals and the Addis Ababa Action Agenda. With information covering 80 countries, the Global Revenue Statistics Database sets the global standard for robust and comparable tax revenue data said Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration. It is a vital foundation for tax policy reform and in supporting efforts to raise domestic resources to fund development. Source: 4

5 5. France: Basis for local taxation (CVAE) includes transfer pricing reassessments The French Supreme Tax Court held that the French tax authorities can consider income that is not booked in the accounts of the taxpayer-company for purposes of determining a tax on added value ( Cotisation sur la Valeur Ajoutée CVAE). In this case, the amount at issue related to a transfer pricing re-assessment. The CVAE is a tax levied on enterprises at the national level, but for the benefit of local councils. The CVAE tax liability is equal to a certain percentage (in general 1.5%, but less for those enterprises with gross revenues below 50 million) of the added value produced by enterprises. The added value is based on the accounts of the enterprise. Tax professionals have observed that the Tax Court, has gone further than it did in a previous decision in which the court only considered that an expense considered to be non-deductible further to a transfer pricing, as a consequence, transfer pricing re-assessments affect not only the corporate tax basis of the enterprises but also the basis for the CVAE liability resulting in additional costs that, in some instances, could be substantial. Source: 5

6 6. OECD releases BEPS discussion draft on the transfer pricing aspects of financial transactions Public comments are invited on a discussion draft on financial transactions, which deals with followup work in relation to Actions 8-10 ("Assure that transfer pricing outcomes are in line with value creation") of the BEPS Action Plan. The 2015 report on BEPS Actions 8-10 mandated follow-up work on the transfer pricing aspects of financial transactions. Under that mandate, the discussion draft, which does not yet represent a consensus position of the Committee on Fiscal Affairs or its subsidiary bodies, aims to clarify the application of the principles included in the 2017 edition of the OECD Transfer Pricing Guidelines, in particular, the accurate delineation analysis under Chapter I, to financial transactions. The work also addresses specific issues related to the pricing of financial transactions such as treasury function, intra-group loans, cash pooling, hedging, guarantees and captive insurance. The document also identifies a number of issues on which feedback is particularly sought. Source: 6

7 7. German and French Governments Agree on Common Corporate Tax Base Germany and France have put up a united front on a European Commission proposal for a harmonized corporate tax base, calling for changes such as extending the proposals to apply to companies of all sizes. In a position paper posted on the German and French finance ministry, the two countries expressed strong support for the commission s efforts to relaunch its common consolidated corporate tax base (CCCTB). Because the main goals of corporate tax base harmonization are to increase transparency and boost EU competitiveness, it s essential that harmonization applies to all corporate taxpayers, according to the paper. As a result, Germany and France called for extending the scope of the CCTB proposal to apply to all companies subject to corporate tax regardless of type or size. Since both countries agree that a harmonized corporate tax base shouldn t have any tax incentives, they opposed provisions related to equity finance and research and development tax incentives, as well as measures on cross-border loss relief, according to the paper. Source: base/2018/06/21/285dw 7

8 8. New Zealand passes BEPS bill to prevent multinational tax avoidance New Zealand s parliament has passed the Taxation (Neutralizing Base Erosion and Profit Shifting) Bill, aimed at curtailing tax avoidance by multinationals, Revenue Minister Stuart Nash announced in a statement. The new law, which will enter into effect, will address profit shifting through related party transactions including loans, use of hybrid mismatches by multinational groups, foreign company schemes designed to avoid a permanent establishment in New Zealand, and failure to disclose information to revenue authorities. This legislation will ensure that multinationals pay tax based on the actual economic activity they carry out in New Zealand, Nash said. Source: 8

9 9. US supreme court permits states to tax remote sales In a landmark decision, the Supreme Court of the United States overturned existing case law by ruling that a state can collect sales tax on remote sales even when the vendor does not have a physical presence in the state. The highly anticipated decision reverses the Supreme Court's pre-internet Quill decision of 1992, which held that states cannot force sales tax collection obligation on vendors who do not have personnel or property in the state (the "physical presence" standard). The court concluded that: "The Commerce Clause must not prefer interstate commerce only to the point where a merchant physically crosses state borders. Rejecting the physical presence rule is necessary to ensure that artificial competitive advantages are not created by this court's precedents. This court should not prevent states from collecting lawful taxes through a physical presence rule that can be satisfied only if there is an employee or a building in the state." 9

10 Source: html 10. EU Commission erred in Starbucks State aid case, Netherlands tells court The Netherlands government, on July 2, advanced three arguments before the General Court of the European Union in support of its contention that the EU Commission reached erroneous conclusions in its Starbucks State aid decision, the Dutch Ministry of Finance said. The Netherlands suit in General Court, filed late December 2015, challenges the European Commission s October 2015 decision concluding that an advance pricing agreement (APA) granted to a Starbucks subsidiary by the Netherlands sanctioned the payment of too little tax to the Netherlands. The Commission concluded that the ruling was illegal State aid and ordered recovery of the unpaid taxes by the Netherlands. According to the Dutch ministry, the Netherlands argued before the General Court that the Commission erred because it failed to carry out its transfer pricing analysis based on the arm s length principle, as formulated under Netherlands law and regulations. The ministry also said it believes the profit determination it used in the APA was arm s length. Starbucks Dutch subsidiary was a coffee roaster that conducts simple routine activities and should receive remuneration accordingly, the Dutch ministry said. The ministry said the Starbucks subsidiary s remuneration was compared against 20 independent roasters. Moreover, the Dutch ministry told the court that the Commission s argument that other intercompany transactions should have been assessed is faulty because these transactions are not relevant for determining the arm s length profit of Starbucks Dutch subsidiary. The Dutch ministry maintains that part of the income identified by the Commission as attributed to the Netherlands was in fact earned in the US. 10

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