OECD BEPS Action Plan Report - PKF International · 2017-01-11 · The content of the PKF OECD BEPS...

December 2016

OECD BEPS Action Plan Report Status Update

OECD - BEPS Action Plan Status Update Report

1

Background • Taxation is at the core of countries’ sovereignty, but the interaction of domestic tax rules can lead to gaps and frictions • Existing tax rules have revealed weaknesses • In the changing international tax environment, concern has been expressed as regards the international standards • The G20 Finance Ministers called on the OECD to develop an Action Plan • The goal is to make fundamental changes to the current mechanism in order to:

− Prevent double non-taxation − Prevent no or low taxation − Develop new harmonized international standards on corporate income taxation at the international level

• This resulted in the OECD BEPS Action Plan Report with 15 action points and corresponding timelines Objective • The PKF International Tax Network is pleased to provide you with a status update of the global implementation of the OECD BEPS Action Plan

Report • The PKF International Tax Network commits to update this report on a 6 monthly basis For your convenience, please find a summary of the 15 Action Points discussed by the OECD BEPS Action Plan Report below:

Status Update December 2016


2

1

Digital economy

Action 1 aims to identify and

address the main challenges that the

digital economy poses for the

existing international tax

rules

Action Point

2

Hybrids

Action 2 aims to neutralize the

effects of hybrid mismatch

arrangements by making changes to

the Model Tax Convention and

providing recommendations

on the design of domestic rules to

prevent hybrids from being a source

of ‘double non – taxation’

Action Point

3

CFC’s

Action 3 aims to develop

recommendations regarding the

design and strengthening of

controlled foreign corporation (CFC)

rules, to address concerns over the

possibility of creating affiliated

non – resident taxpayers and

routing income of a resident enterprise through the non –

resident affiliate or avoid taxation

Action Point

4 Interest deductions

Action 4 aims to

limit base erosion via interest

deductions and other financial

payments. Recommendations are expected to be

published for domestic law

limitations on tax deductions for both

related and unrelated party

interest expense and economically

equivalent payments. The workstream will

also develop guidance for the

transfer pricing of debt arrangements

Action Point

5 Harmful tax practices

Action 5 aims to

identify and counter harmful tax

practices, taking into account

transparency and substance. The

Action Plan will look at developing both recommendations on the definition of

harmful tax practices and a

strategy to expand to non – OECD

members

Action Point

6 Prevent treaty abuse

Action 6 aims to prevent treaty

abuse, through developing model

treaty provisions and

recommendations regarding the

design of domestic rules to prevent the

granting of treaty benefits in

inappropriate circumstances

Action Point

7 PE status

Action 7 aims to prevent the artificial

avoidance of Permanent

Establishment (“PE”) status, by

redefining the threshold for

creating a PE to prevent base

erosion and profit shifting. The work

includes a focus on the use of

commissionaires and keeps some

specific activity exemptions, including for warehousing

Action Point

8 TP – intangibles

Action 8 looks specifically at

intangibles and will develop transfer

pricing rules to prevent base

erosion and profit shifting where

intangibles are owned by, used by,

contributed to or moved among

group members

Action Point


3

9

TP – capital related high-risk transactions

Action 9 looks specifically at risks

and will develop transfer pricing rules

to prevent base erosion and profit

shifting by transferring risks

among, or allocating excessive capital to,

group members

Action Point

10

TP – other high-risk transactions

Action 10 looks specifically at other

high-risk transactions and will

develop transfer pricing rules to

prevent base erosion and profit shifting by

engaging in transactions which

would not, or would only very rarely,

occur between third parties

Action Point

11

BEPS data collection

Action 11 aims to establish

methodologies to collect and analyse data on BEPS and

the actions to address it. The

OECD intends to do this by developing recommendations

regarding indicators of the scale and

economic impact of BEPS and ensure

that tools are available to monitor

and evaluate the effectiveness and

economic impact of the actions taken to

address BEPS on an ongoing basis

Action Point

12

Disclosure of aggressive tax planning

Action 12 aims to require taxpayers to

disclose their aggressive tax

planning arrangements. This

will be addressed through the

development of recommendations

regarding the design of mandatory

disclosure rules for aggressive or

abusive transactions, arrangements or

structures, taking into consideration the

administrative costs for tax

administrations and businesses and drawing on the

experiences of the increasing number of countries that already

have such rules

Action Point

13

TP – documentation Action 13 aims to re-

examine transfer pricing

documentation and will develop rules

regarding transfer pricing

documentation to enhance

transparency for tax administration, taking into consideration the compliance costs for

business

Action Point

14

Dispute resolution

Action 14 aims to make dispute

resolution mechanisms more effective, through

developing solutions to address issues that

prevent countries from resolving treaty-

related disputes under mutual

agreement procedures

Action Point

15

Multilateral instrument

Action 15 aims to develop a

multilateral instrument to enable

jurisdictions to implement measures

developed in the course of the work

on BEPS and to amend bilateral tax

treaties

Action Point


4

Country Page Australia 8

Austria 10

Belgium 12

Brazil 14

Bulgaria 16

China 18

Cyprus 20

Czech Republic 22

Denmark 24

Estonia 26

France 28

Germany 31

Greece 33

Hong Kong 35

Hungary 38

India 40

Ireland 42

Italy 45

Japan 48

Luxembourg 50


5

The content of the PKF OECD BEPS Action Plan Status Update Report has been compiled and coordinated by both Kurt De Haen ([email protected]) and Janke Tierens ([email protected]) of PKF-VMB Accountants & Tax Consultants cvba (PKF-VMB). Please contact Kurt or Janke should you have any questions, comments or suggestions.

Country Page Netherlands 53

Portugal 55

Romania 57

Russia 59

Slovakia 61

Slovenia 63

South Africa 65

Spain 68

Sweden 70

Switzerland 72

Thailand 74

Turkey 76

United Kingdom 78

United States of America 81


6

Abbreviation Description AEOI Automatic Exchange of (Financial Account) Information

AOA Authorized OECD Approach

APA Advance Pricing Agreement

B/S Balance Sheet

B2B Business to Business

CbC Country-by-Country

CFC Controlled Foreign Corporation

CRS Common Reporting Standard

DoTAS Disclosure of Tax Avoidance Scheme

DTT Double Tax Treaty

EBIT Earnings Before Interest and Taxes

EBITDA Earnings Before Interest, Taxes, Depreciation and Amoratization

EEA European Economic Area

FATCA Foreign Account Tax Compliance Act

GAAR General Anti-Abuse Rule

GST Goods and Services Tax

IP Intellectual Property

LoB Limitation on Benefits

LSA Location Specific Advantages

MAP Mutual Agreement Procedure


7

Abbreviation Description MCAA Multilateral Competent Authority Agreement

MLC Multilateral Controls

MNE Multinational Enterprise

MOSS Mini One Stop Shop

NCST Non-Cooperation State or Territory

NHTE New/High Technology Enterprises

OTD Offshore Taxation Division

PE Permanent Establishment

PPT Principal Purpose Test

PSD Parent Subsidiary Directive

RCS Regulatory Capital Securities

SAT State Administration of Taxation

TCAL Tax Collection and Administration Law

TIEA Tax Information Exchange Agreement

TP Transfer Pricing

VAT Value Added Tax

WHT Withholding Tax


8

Action Point Status of Action Point “In the pipeline”

1

Digital economy • GST (VAT) is being extended to digital products and services supplied by nonresidents to Australian consumers from 1 July 2017 n/a

2

Hybrids • No specific action yet taken • The Board of Taxation has been asked to report

to Treasury on the implementation of new tax laws to neutralize hybrid mismatch arrangements

3

CFC’s • No specific action yet taken n/a

4

Interest deductions • Australia is unlikely to tighten its existing safe-harbor 60% debt to total asset thin capitalisation rules n/a

5

Harmful tax practices • No specific action yet taken n/a

6

Prevent treaty abuse • No specific action yet taken • Australia will act to incorporate the OECD's

recommendations on treaty abuse into Australia's treaty practice

7

PE status • Australia has introduced its own version of the UK’s Google tax to tax

certain non-residents as if they have a PE in Australia where certain steps have been taken which constitute the avoidance of a PE

n/a

Country Australia PKF member firm PKF Sydney

Your contact Robert Lynch Email [email protected]


9


8

TP - intangibles • No specific action yet taken n/a

9

TP – capital related high-risk transactions • No specific action yet taken n/a

10

TP – other high-risk transactions • No specific action yet taken n/a

11

BEPS data collection • No specific action yet taken n/a

12


• No specific action yet taken n/a

13

TP – documentation

• Australian taxpayers with accounting periods commencing on or after 1 January 2016 and where their global revenue exceeds A$ 1 billion will be required to lode one or more of the following:

- CbC Report - Master-file - Local-file

n/a

14

Dispute resolution • No specific action yet taken • Australia committed to mandatory binding arbitration under the MAP

15

Multilateral instrument • No specific action yet taken • Australia involved in the development of the multilateral instrument


10


1

Digital economy • No specific action taken yet n/a

2

Hybrids • Austria implemented the July 2014 amendment of the EU PSD disallowing the

benefits of the Directive (in essence participation exemption relief) if the “dividend income” gave rise to a “tax deduction” in the source country

n/a

3

CFC’s • There is no specific CFC legislation in Austria, but a regime similar to a PPT is in

place for deciding on reliefs for dividends and capital gains from foreign subsidiaries

n/a

4

Interest deductions

• Austria has already introduced two specific restrictions for interest deductions within a group, i.e. for interest on loans to finance intra-purchases of entities and for interest from low tax jurisdictions, but does not apply a general thin capitalization scheme

n/a

5

Harmful tax practices • No specific action taken yet n/a

6

Prevent treaty abuse • No specific action taken yet n/a

7

PE status • No specific action taken yet n/a

Country Austria b PKF member firm PKF Österreicher-Staribacher (Vienna)

Your contact Thomas Ausserlechner Email [email protected]


11


8

TP - intangibles • No specific action taken yet n/a

9

TP – capital related high-risk transactions • No specific action taken yet n/a

10

TP – other high-risk transactions • No specific action taken yet n/a

11

BEPS data collection • No specific action taken yet n/a

12


• No specific action taken yet n/a

13


• Austria has introduced mandatory CbC-reporting from 2016 onwards for businesses with sales over EUR 750 million

• For Austrian tax purposes, TP documentation should not mandatorily be filed but on demand filing is required within 1 month (new TP documentation law just introduced)

n/a

14

Dispute resolution • Austria has announced to include such clauses in current and future treaties and has already done so in the past with selected parties, such as Germany n/a

15

Multilateral instrument • No specific action taken yet n/a


12


1 Digital economy • No specific action taken yet n/a

2

Hybrids • Belgium approved the July 2014 amendment of the EU PSD disallowing the benefits

of the Directive (in essence participation exemption relief) if the “dividend income” gave rise to a “tax deduction” in the source country

• Belgian tax legislation in process

3 CFC’s • There is no CFC legislation in Belgium n/a

4 Interest deductions • No specific action taken yet n/a

5

Harmful tax practices

• Belgian tax ruling commission only signs-off upfront tax ruling decisions if the transaction is embedded with relevant substance

• Belgian tax ruling decisions regarding cross-border structures that were concluded as of 1/1/2015 are spontaneously shared with other jurisdictions

• Pursuant to Belgian “Cayman tax” legislation, low-tax (<15%) foreign legal structures lacking both genuine business rationale and local substance are considered transparent; individuals subject to Belgian (non) resident personal income tax and entities subject to Belgian non-for-profit income tax are taxable in Belgium on the income derived by the foreign legal structure

• Belgian patent income deduction abolished with grandfathering period until 2021

• Upgraded Belgian IP-tax legislation expected

6

Prevent treaty abuse • Belgium approved the July 2014 amendment of the EU PSD disallowing the benefits

of the Directive (in essence participation exemption relief) if the “dividend income” gave rise to a “tax deduction” in the source country

• Belgian tax legislation in process

7 PE status • Belgian tax ruling commission only signs-off upfront tax ruling decisions if the transaction is embedded with relevant substance n/a

Country Belgium PKF member firm PKF-VMB Brussels

Your contact Kurt De Haen Email [email protected]


13


8


9


10


11

BEPS data collection • Belgian tax ruling decisions regarding cross-border structures that were concluded as of 1/1/2015 are spontaneously shared with other jurisdictions n/a

12


• Individuals subject to Belgian (non) resident personal income tax have to report in their Belgian personal tax return if they are the founder, holder or beneficiary of a foreign legal structure and to what extent such structure is embedded with relevant business substance

n/a

13

TP – documentation • As of 2016, mandatory TP documentation filing requirements (local file, master file and CbC report) if conditions are satisfied n/a

14

Dispute resolution • No specific action taken yet n/a

15



14


1

Digital economy • No specific action taken yet See * below

2

Hybrids • No specific action taken yet See * below

3

CFC’s • No specific action taken yet. However, Brazilian Law states some procedures similar to CFC´s rules. See * below

4

Interest deductions • No specific action taken yet See * below

5

Harmful tax practices • No specific action taken yet See * below

6

Prevent treaty abuse • No specific action taken yet See * below

7 PE status • No specific action taken yet See * below

Country Brazil

PKF member firm PKF Brazil Your contact Marcelo Couceiro

Email [email protected]


15


8

TP - intangibles • No specific action taken yet See * below

9

TP – capital related high-risk transactions • No specific action taken yet See * below

10

TP – other high-risk transactions • No specific action taken yet See * below

11

BEPS data collection • No specific action taken yet. Despite the fact that ECF is an electronic version of an

Income Tax Return in Brazil for calendar year 2017 to inform CbC Report if Braco is ultimate or controlled company of affiliates in countries subject to BEPS.

See * below

12


• No specific action taken yet See * below

13

TP – documentation • No specific action taken yet See * below

14

Dispute resolution • No specific action taken yet See * below

15

Multilateral instrument • No specific action taken yet See * below

* Whilst Brazil is not a member of the OECD, and will not specifically follow the 15 point action plan, it is taking steps towards OECD’s recommendations, promulgating

domestic laws enforcing transparency in business relations. E.g. the Brazilian IRS has issued a Normative Instruction enforcing the communication, through an ancillary obligation named ECF, of business transactions with companies that are members of the OECD, and therefore, subject to BEPS. In this CbC report, as is called, the companies will be required to inform the IRS about controller or controlled companies abroad and their operations with them and key aspects of the companies to cross reference those information with the Country’s Tax Authorities that said company is stablished. In June 2016, the Standard for A in Tax Matters, edited in 1988, was ratified and will be enforced in Brazil starting 1 January 2017.


16



2 Hybrids • No specific action taken yet n/a

3 CFC’s • There is no CFC legislation in Bulgaria n/a


5


• The Act on the ‘Economic and Financial Relations with Companies Registered in Preferential Tax Regime Jurisdictions, the Persons Related to Them and their Beneficial Owners’ (the “Act”) entered into force on 3 January 2014. The Act imposes a prohibition for companies registered in preferential tax regime jurisdictions, and the persons related to them, to be directly or indirectly involved in the following activities: banking, insurance, pension and investment funds, mobile operators, mining, obtaining public procurement, concessions, and, public-private partnerships

• Such companies are disallowed to take participation in privatization transactions, and companies with state or municipal ownership, in companies carrying out activities under the Independent Financial Audit Act, the Independent Valuators Act and the Renewable Energy Act, acquisition of state or municipal property, as well as ownership over land and forests from the state forest fund

• The prohibition is also applicable to any persons related to those companies that are registered in preferential tax regime jurisdictions, including companies that have (in)direct control over such legal entities, as well as their subsidiaries

n/a

6 Prevent treaty abuse • No specific action taken yet n/a

7 PE status • No specific action taken yet n/a

Country Bulgaria

PKF member firm PKF Bulgaria

Your contact Venzi Vassilev Email [email protected]


17


8


9


10


11


12



13

TP – documentation • For Bulgarian tax purposes, TP documentation should not mandatorily be filed n/a

14


15



18




3

CFC’s

• In process of improving CFC rules (e.g., elaborate the definition of “control” and clarify how to determine the attributable income, etc.)

• The OTD was established by the SAT in early 2015. OTD establishment is aiming to provide more services and enhance information collection capabilities

• Revised CFC rules are reflected in the Discussion Draft of the revised Implementation Measures of the Special Tax Adjustment (Guoshuihan 2009 No. 2, Circular). The Discussion Draft is still open for public consultation, but expected to apply to fiscal year 2016

4

Interest deductions

• Thin capitalization rules are improved e.g. scope of interest expenses clarified, a more reasonable debt/equity ratio and specific features of certain industries considered, and the carry forward or carry back of non-deductible interest expenses considered, etc.)

• Difficult to localize all BEPS recommendations at this stage; limitation only applied on interest deduction to related party loans

• May apply limitation to interest deduction to both related party and non-related party loans when there is an opportunity to revise the CIT law in the future

5


• Action point 5 Report was released in 2014, domestic interest on China’s CIT incentives provided to NHTE was high

• China considers the NHTE incentive a harmful tax practice; however it will not be suspended as China applies a more strict assessment method than BEPS recommends “Nexus approach”

n/a


7

PE status • The SAT work plan in relation to PE will focus on improving PE administrative rules and strengthening the administrative practice

• The SAT will establish a PE information sharing system between local-level state tax bureaus and local tax bureaus and enhance information with exit and entrance (immigration) administrations

Country China

PKF member firm PKF China

Your contact Josephine Yanagi Email [email protected]


19


8

TP - intangibles

• In process of improving TP rules • The SAT is of the view that it is necessary to analyse the contributions made by local

Chinese enterprises to intangibles so as to ensure contributions are reasonably compensated by foreign related parties, especially where the legal owner of the intangibles resides outside China

• The SAT is also of the view that LSA also create values, and LSA has been well recognized in comparability analysis, contribution analysis and profit split consideration.

• Capital related risks are rather difficult to identify but is easy to transfer. Consequently, in TP analysis, risks should not be assessed alone, without considering the function

• The Discussion Draft does not provide safe harbour rules on low value-adding services

• The Discussion Draft is still open for public consultation, expected to be officially released in later 2016, and apply to fiscal year 2016

9 TP – capital related high-risk transactions

• See action point 8 • See action point 8

10 TP – other high-risk transactions • See action point 8 • See action point 8

11 BEPS data collection • No specific action taken yet n/a

12


• The SAT task force member disclosed that in the revision of the TCAL, the SAT plans to bring in the mandatory disclosures regime under which taxpayers or scheme promoters are obliged to disclose their aggressive tax planning information to the tax authorities

n/a

13

TP – documentation • The SAT has introduced the new TP documentation requirements in the Discussion Draft • There are indeed additional requirements which are not found in the BEPS

recommendations, for example, the addition of the value chain analysis in China’s TP documentation requirements

• The Discussion Draft is still open for public consultation, expected to be officially released in later 2016, and apply to fiscal year 2016

14

Dispute resolution

• China does not accept the mandatory binding arbitration under MAP in action point 14 Report

• The SAT still support action point 14 and will try its best to improve the efficiently of the MAP process in China

n/a

15 Multilateral instrument • No specific action taken yet n/a


20



2

Hybrids • Cyprus approved the July 2014 amendment of the EU PSD disallowing the

benefits of the Directive (in essence participation exemption relief) if the “dividend income” gave rise to a “tax deduction” in the source country

n/a

3

CFC’s

• Cyprus has CFC rules saying that overseas dividend income is only tax-exempt in Cyprus if the dividend distributing company derives its income (in)directly from non-investment activities or if substantially low tax has been paid on those profits

n/a

4

Interest deductions • Cyprus has existing interest expense restriction criteria where borrowings exist to finance non-business assets n/a

5 Harmful tax practices • No specific action taken yet n/a


7

PE status • No specific action taken yet other than the definitions followed in OECD model double tax treaty n/a

Country Cyprus

PKF member firm PKF Savvides & Co Ltd

Your contact Nicholas Stavrinides Email [email protected]


21


8

TP - intangibles • No specific action taken yet other than application of arm’s length principle on

related party transactions n/a

9


• No specific action taken yet other than application of arm’s length principle on related party transactions n/a

10



11


12



13

TP – documentation • No specific action taken yet other than application of arm’s length principle on related party transactions n/a

14


15



22




3 CFC’s • No specific action taken yet n/a

4

Interest deductions

• Czech income tax law specifies the rules for interest deductions between related parties • Thin capitalisation rules exist in the Czech Republic:

- The thin capitalisation rules apply to related-party loans only and the test captures not only interest but ‘financial costs’ on loans as well;

- The debt-to-equity ratio for related-party loans is 4:1 (6:1 for financial services industry);

- Interest on profit-participating loans is not tax deductible.

n/a


6

Prevent treaty abuse

• The Czech tax law includes a clause which prevents the benefits of DTT’s or favorable tax regimes. Upon mutual agreement, the competent authorities may deny the benefits to any person, or to any transaction undertaken by such a person, if in their view the main purpose of the creation or existence of such a person was to obtain the latter benefits that would otherwise not have been available.

n/a


Country Czech Republic

PKF member firm APOGEO, s.r.o.

Your contact Jaroslava Hanková Email [email protected]


23


8

TP - intangibles • Since 2015 tax payers are obliged to file a separate attachment to the income tax return

to declare selected transactions with related persons n/a

9


• Since 2015 tax payers are obliged to file separate attachment to the income tax return to declare selected transactions with related persons n/a

10


• Since 2015 tax payers are obliged to file separate attachment to the income tax return to declare selected transactions with related persons. The scrutiny of transfer prices has been increased

n/a

11


12


• New TP requirements n/a

13

TP – documentation • TP documentation should not be filed mandatorily but it is recommended. Since 2015

tax payers are obliged to file separate attachment to the income tax return to declare selected transactions with related person

n/a

14


15

Multilateral instrument • MLC tax audit under Council Directive n/a


24



2

Hybrids

• Denmark has approved and implemented the July 2014 amendment of the EU PSD disallowing the benefits of the Directive (in essence participation exemption relief) if the “dividend income” gave rise to a “tax deduction” in the source country

n/a

3

CFC’s

• No specific action taken lately – however in January 2016 the Legal Guide 2016-1 from the Danish tax authorities was issued, providing information on the Danish CFC rules. It is required for Danish companies to include income from foreign and domestic subsidiaries and foreign PE’s if the Danish parent company owns more than 50 % of the capital or has more than 50 % of the voting rights in the PE or subsidiary, if more than half of the subsidiary’s taxable income is from passive forms of income such as interest, royalty, capital gains etc. and if the subsidiary’s assets generating the passive income are more than 10 % of the subsidiary’s total assets

n/a

4

Interest deductions

• No specific action taken lately – however Denmark has existing interest deduction restrictions. Its thin capitalization rules follow three main criteria: - A debt-to-equity ratio of 4:1; - An asset-based rule that applies in relation to financing costs that remain

after the thin cap limitation; and; - An EBIT based rule which restricts the deductibility of financing costs which

remain following the thin cap-test and the asset-based rule to an amount equating to 80% of the Danish company’s/tax group’s taxable EBIT income

n/a


Country Denmark

PKF member firm PKF Munkebo Vindelev

Your contact Kasper Vindelev Email [email protected]


25


6


• Denmark has implemented legislation to meet action point 6 to prevent treaty abuse by introducing a new international anti-abuse tax rule (GAAR), which denies tax treaty and EU tax directive benefits in cases of deemed abuse. However, if the arrangement or transaction(s) is consistent with the contents and purpose of the relevant article, the taxpayer can still receive the benefit

n/a


8 TP - intangibles • Denmark’s TP rules generally meet the 2010 OECD Transfer Pricing Guidelines • When the OECD’s TP Guidelines are

updated, the Danish rules will follow

9 TP – capital related high-risk transactions • Denmark’s TP rules generally meet the 2010 OECD Transfer Pricing Guidelines • When the OECD’s TP Guidelines are


10 TP – other high-risk transactions • Denmark’s TP rules generally meet the 2010 OECD Transfer Pricing Guidelines • When the OECD’s TP Guidelines are


11


12



13

TP – documentation • Denmark has implemented legislation including requirements regarding a Master File, Local File and for MNE’s to file a CbC report n/a

14


15

Multilateral instrument • MLC tax audit under Council Directive n/a


26


1


2

Hybrids • No specific action taken yet n/a

3

CFC’s • There is no CFC legislation in Estonia n/a

4

Interest deductions • No specific action taken yet n/a

5


6


7


Country Estonia

PKF member firm PKF Estonia

Your contact Rein Ruusalu Email [email protected]


27


8


9


10


11


12



13

TP – documentation • No specific action taken yet n/a

14


15



28



2 Hybrids • French tax law provides that the benefit of the PSD regime does not apply to hybrid instruments n/a

3

CFC’s

• CFC rules apply to resident companies that directly or indirectly hold a participation of more than 50% in a foreign legal entity or PE that is established or incorporated in a country with an effective tax rate that is at least 50% lower than that of France

• EU companies are outside the scope of the CFC rules (unless the structure was put in place to avoid tax), and the CFC rules also may not apply to a CFC that is outside the EU in certain circumstances

• An anti-abuse provision reduces the participation threshold to 5% where more than 50% of the shares in the foreign entity are owned by French companies or by foreign entities directly or indirectly controlled by a French company

• A similar set of rules applies to individuals

n/a

4

Interest deductions

• As a general rule, tax deduction of interest is limited to the average bank interest rate for corporate loans with a duration of more than 2 years; or to the higher market rate

• Other traditional limitations on the deductibility of interest apply only to specific, potentially abusive transactions. The rule generally known as the Charasse amendment limits the deductibility of interest on debt incurred to acquire related party shares followed by the inclusion of both entities in the same tax group. French tax law disallows an interest deduction on a loan granted by an affiliated company if the interest is not subject to a tax at the level of lending company that is equal to at least 25% of the tax that would have been due under the normal French rules

• Interest expenses due by a French company in relation to intragroup loans and also third party loans guaranteed by an affiliated company are not fully tax deductible if three ratios are cumulatively exceeded in the relevant fiscal year (when excess interest equals max EUR 150.000):

n/a

Country France

PKF member firm PKF Audit Conseil Expertise, S.A.S.

Your contact Guy Castinel Email [email protected]


29


4

Interest deductions (Continued)

- The debt/equity ratio: the average amount of intragroup loans must not exceed 1.5 times the amount of the net equity (or the amount of share capital if this is a higher amount) of the French company

- The earnings ratio: the amount of interest expenses relating to qualified loans must not exceed 25% of the current-year EBITDA

- The interest income test: the amount of interest expenses relating to qualified related party loans must be less than the amount of interest income received by the company from related entities

• Interest on shareholding loans is only deductible if the decisions were taken in France • If accrued interest exceeds EUR 3 million, tax deduction is capped at 75% of the net interest

charges

n/a

5


• A French resident having a min. 10% shareholding or having operations with an entity located in a NCST is taxed on that entity’s income, even though the revenue has not been distributed or effectively received by the French resident

• Sums received by a nonresident for services rendered by a French resident or for services rendered in France by a nonresident are taxable in France in the hands of the service provider if certain conditions are met

• Non at arm’s length payments are disallowed if the beneficiary is subject to a privileged fiscal regime i.e. if it is not subject to taxes on profits or income or if it is subject to a tax rate lower than 50% of the French rate

• Dividends, interest, royalties and service fees paid to companies located in a NCST may be subject to a 75% WHT

• Dividends received from NCST entities cannot benefit from the participation exemption, except if business drivers can de demonstrated

n/a

6 Prevent treaty abuse • Some tax treaties with France comprise a GAAR rule while others contain a specific LoB rule n/a

7 PE status • Specific rules to compute duration of “construction site” PE; Introduction of service PE n/a

8 TP - intangibles • No specific action taken since current TP rules should suffice n/a

9 TP – capital related high-risk transactions • No specific action taken yet n/a

10 TP – other high-risk transactions • No specific action taken yet n/a


30


11


• All French entities with turnover or gross assets on the B/S exceeding EUR 400 million, or with a >50% direct or indirect subsidiary meeting this threshold are subject to the updated French TP documentation requirements

• This includes the obligation to disclose foreign tax rulings to the French tax rulings authorities n/a

12


• The French tax administration has posted on its website, an updated list of “abusive” practices or arrangements n/a

13


• All French entities with turnover or gross assets on the B/S exceeding EUR 400 million, or with a >50% direct or indirect subsidiary meeting this threshold are subject to the updated French TP documentation requirements

• Parent companies of multinational groups with annual revenue exceeding EUR 750 million would be required to file a CbC report within 12 months following the end of the fiscal year. Failure to file this report would be subject to a EUR 100.000 penalty

• The tax administration in France would then transmit the CbC reports to other countries where the group has its operations, via an information exchange mechanism provided for by the tax treaties, under the condition of reciprocity

• The CbC reporting requirement would also apply to French subsidiaries of MNE’s whose “head company” is established in a country or territory that does not share CbC reports with France

• The CbC disclosure would be made public

14

Dispute resolution • In the French tax treaty concluded with Andorra, China, Colombia and Singapore, an amical dispute resolution rule is included n/a

15



31



2

Hybrids • Germany has already installed a set of effective Linking Rules. They are currently reviewed in the amendment of the Income Tax Act

• Germany is discussing to add a clause into domestic tax law which would in general stipulate a non-deductibility of expenses, if the corresponding income is not subject to tax for the recipient. That would not be in line with the OECDs approach to limit Linking Rules to related party transactions

3

CFC’s

• German CFC regime exists for decades. It is in principle applicable if more than 50% of the shares in a foreign entity are controlled by German residents and the income of the entity qualifies as passive and is taxed below an effective rate of 25%. CFC regime is regarded to require modernization to be in line with the final OECD report

• The Foreign Tax Act (AStG) will be assessed whether there is a need for amendment. The modernization of the Act is deemed necessary by German authorities

4

Interest deductions • The German interest barrier regime comprising a minimis threshold, an

EBITDA based limitation and carry forward regulations has proved to be an effective instruments in preventing base erosion through interest expenses

n/a

5

Harmful tax practices • In Germany, there is no preferential IP-regime • The existing rules regarding “transfer of functions” make it difficult to transfer

valuable assets such as IP out of Germany n/a

6


• Limitations to Treaty Benefits in case of Treaty Shopping and other situations are stipulated in national German provisions

• Germany seeks to install LoB, switch-over and subject-to-tax clauses in treaties

n/a

Country Germany PKF member firm PKF Fasselt Schlange

Your contact Wolfgang van Kerkom Email [email protected]


32


7

PE status • German tax law already addresses the issue of artificial avoidance of a PE • Definition of PE under national law will be reviewed

8

TP - intangibles • Tight examination of TP under existing German rules and regulations in tax audits n/a

9

TP – capital related high-risk transactions • Tight examination of TP under existing German rules and regulations in tax audits n/a

10

TP – other high-risk transactions • Tight examination of TP under existing German rules and regulations in tax audits n/a

11

BEPS data collection • No specific action taken yet • At national level, certain BEPS relevant data is collected and evaluated by Federal

Central Tax Office n/a

12


• No specific action taken yet

• Plans to install a new Par. 138a in the General Fiscal Code failed 2008; is now again discussed and analyzed by the federal government

13


14


15



33


1

Digital economy • No specific action taken yet; The primary legislative source is the VAT regulation with regard to ecommerce transactions n/a

2

Hybrids • Greece has incorporated into national legislation the EU Directive 2011/98. The approval of the 86/2014 amendment is still pending n/a

3

CFC’s

• Greece has put in place rules to restrict profit shifting, i.e. posing quantitative and qualitative criteria to quantify taxable non-distributed income. However, the exact application of the rules remains problematic

n/a

4

Interest deductions

• Interest is only tax-deductible if at arm’s length or subject to a thin cap rule determined with respect to the taxable profits before EBITDA. Interest expenses are not deductible where the surplus of interest expenses over interest income exceeds 30% of EBITDA

n/a

5


• Greece has rules and procedures to facilitate the exchange information on (in) direct tax issues

• There is a list of jurisdictions with preferential tax regimes as well as jurisdictions considered harmful as they have not adhered to the OECD Model DTT

n/a


7

PE status • According to the current legislation, there are specific criteria to restrict the possibility to avoid the PE status n/a

Country Greece

PKF member firm PKF Euroauditing SA

Your contact Andreas Pournos, George Starakis Email [email protected], [email protected]


34


8


9


10


11


12



13

TP – documentation • The current legislation requires full TP documentation and increased disclosure requirements not only for MNE’s but also for domestic groups

• On January 2016, the competent authority signed-up together with other 31 countries the OECD’s MCAA for the implementation of action point 13

14


15



35



2

Hybrids

• The Hong Kong Inland Revenue Department (“IRD”) noted that the BEPS project has an action plan to neutralize the effects of hybrid mismatch arrangements and is considering to issue a practice note regarding this action plan in the light of the release of the BEPS final reports

• A bill was passed on 26 May 2016 to clarify the profits tax and stamp duty treatment of RCS including certain hybrid instruments issued by financial institutions to meet the Basel III capital adequacy requirements

n/a

3 CFC’s • As Hong Kong adopts a source based taxation system, there is no CFC rules and no specific action is expected n/a

4

Interest deductions

• The IRD has been regulating the deduction of interest expenses heavily in Hong Kong. The IRD considered that the current rules and practices are effective in defending against potential abusive deduction of interest expenses

• Hong Kong currently has no group ratio, fixed ratio or thin capitalization rules n/a

5


• Hong Kong has extended the offshore fund exemption regime to private equity funds. Also, a bill was passed on 26 May 2016 which introduces a concessionary profits tax rate for certain qualifying corporate treasury activities and a deduction for interest on certain intra-group lending transactions

• However, the requirements to be satisfied in order to be able to benefit from the above treatments are stringent. Such policies are only levelling Hong Kong with its major competitors in the Asia- Pacific region and should not result in any harmful tax practices.

• As Hong Kong has become a BEPS associate, it is committed to comply with BEPS minimum standards including Action 5

n/a

Country Hong Kong

PKF member firm PKF Hong Kong Your contact Candice Ng



36


6


• The IRD is taking a more prudent approach in granting tax resident certificates. The IRD would consider whether the applicants are eligible for treaty benefits before issuance of the certificates

• Hong Kong has been approached by certain treaty partners to incorporate the LoB and PPT into the relevant tax treaties. The IRD views that the LoB and PPT may be included in Hong Kong tax treaties in the future. As Hong Kong has become a BEPS associate, it is committed to comply with BEPS minimum standards including Action 6

n/a

7

PE status • The PE article in most tax treaties entered into by Hong Kong adopts the current OECD

model convention. In the light of future development in international practices, Hong Kong may consider to revisit its DTT’s to examine whether amendments are necessary.

n/a

8 TP - intangibles

• Hong Kong currently has no TP regulation regime. The IRD explains in its practice note that it will adopt the OECD guidelines when practicing on the topic

• The IRD would treat TP as high priority and intends to issue a further practice note regarding Actions 8 to 10

• Consultation with Stakeholders will impact on TP legislative process (expected end of 2016).

9 TP – capital related high-risk transactions • See action point 8 n/a

10 TP – other high-risk transactions • See action point 8 n/a


12


• On 22 June 2016, a bill was passed by the Legislative Council to implement AEOI (or CRS) as promulgated by the OECD.

• Financial institutions are expected to report financial accounts held by tax residents of overseas reportable jurisdictions to the IRD on an annual basis.

• A new anti-avoidance provision is also introduced in tax laws, which voids any arrangement entered into by a person, if the aim of such arrangement is to avoid any AEOI due diligence or reporting obligations.

• Reporting financial institutions should register with the IRD by September 2017 and the first AOEI returns will be issued by the IRD in early 2018.

13


• Under Hong Kong Profits Tax, there is no mandatory requirement to prepare or file TP documentation. In the future, IRD may require multinational enterprises to provide more information on operations and TP policies, transactional TP documentation and annual CbC report.

• As Hong Kong has become a BEPS associate, it is committed to comply with BEPS minimum standards including Action 13.

n/a


37


14

Dispute resolution • As Hong Kong has become a BEPS associate, it is committed to comply with BEPS minimum standards including Action 14. n/a

15

Multilateral instrument • Multilateral instrument is considered by the IRD as high priority. Hong Kong may consider

enacting legislation on such multilateral instrument, in order to facilitate the amendment of current tax treaties to incorporate BEPS recommendations.

n/a


38


1 Digital economy n/a n/a

2

Hybrids • Hungary approved the July 2014 amendment of the EU PSD

disallowing the benefits of the Directive (in essence participation exemption relief) if the “dividend income” gave rise to a “tax deduction” in the source country

n/a

3

CFC’s

• Hungary has introduced CFC legislation. A foreign entity qualifies as CFC if the ultimate owners are Hungarian tax resident private persons, or if the majority of the income of the entity is generated from Hungary, provided, in both cases, the corporate income tax paid by the foreign entity doesn’t reach the 10% threshold. This rule is not applicable to foreign entities which are resident in the EU or in a country that Hungary has a DTT, provided the entity has substantial activity in its country of registration

n/a

4

Interest deductions

• Hungary has fully implemented the EU PSD, interest and royalties, merger and savings directives into domestic law. Under the thin capitalization rules, interest paid by a taxpayer on a loan or other interest-bearing liability is non-deductible to the extent it exceeds three times the taxpayer’s equity (i.e. a 3:1 debt-to-equity ratio).

n/a

5 Harmful tax practices n/a n/a

6

Prevent treaty abuse n/a

• As of 2017 tax advantages of a transaction will not be applicable, and the costs and expenditures cannot be considered as incurred in the course of business, if the main (before 2017: the only) goal of the transaction was simply achieving the tax advantage itself.

Country Hungary

PKF member firm PKF Consulting Kft.

Your contact Vadkerti Krisztián Email [email protected]


39


7 PE status • No specific action taken yet other than the definitions followed in OECD model DTT n/a

8

TP - intangibles

• The Hungarian legislation refers to the OECD Guidelines; the TP treatment of intangibles is therefore the same as in the Guidelines. In case of transactions involving IPs procured/declared/generated beyond 30.06.2016 only the half of the profit (formerly: the revenue) can be deducted from the CIT base. If a related entity was also involved with the transaction (from which the profit has been gained), deduction can be endorsed on a pro rata basis to the taxpayer’s own contribution.

n/a

9 TP – capital related high-risk transactions n/a n/a

10 TP – other high-risk transactions n/a n/a

11 BEPS data collection • SAT has begun reporting data about the issued APA resolutions in this summer n/a

12

Disclosure of aggressive tax planning n/a

• As of 2017 bad debt connected to a related party can be deducted from CIT base only in case of a detailed reporting in the CIT return.

13 TP – documentation • Hungary has strict TP documentation regulations, which were modified in 2015 regarding the benchmarking processes.

• If a taxpayer wants to reduce its Hungarian CIT base due to a TP-adjustment, the other party has to declare it is willing to increase its own CIT base with the same amount. The action comes into force on 1st January 2017.

14

Dispute resolution • The EU dispute resolution mechanisms are applied in Hungary. A

detailed guideline appeared on the SAT’s website on 6 July 2016 about the applicable procedure and deadlines.

n/a

15 Multilateral instrument n/a n/a


40


1

Digital economy

• Equalisation Levy of 6% enacted with effect from 1st June 2016, are chargeable on the gross payment, for specified digital services and facilities, received or receivable by a non-resident who does not have a PE in India.

n/a

2


3

CFC’s • The rules of residence were already changed to vest residency in India for

foreign companies whose effective place of management is in India. These rules have been deferred till April 2017

n/a

4


5

Harmful tax practices • GAAR have been enacted and would be enforced as of April 2017 n/a

6

Prevent treaty abuse • GAAR should address this. In addition to GAAR, India has amended its

DTT with Mauritius and Cyprus to prevent abuse of the DTT. India’s Treaty with Singapore is linked with Mauritius treaty.

n/a

7

PE status • This is governed by DTT rules n/a

Country India

PKF member firm PKF Sridhar & Santhanam Chennai India

Your contact S Hariharan Email [email protected]


41


8

TP - intangibles • TP provisions are used to deal with this n/a

9


10


11


• Transaction between related parties are required to be certified as being at arms‟ length. CbC reporting provisions have been implemented with effect from April 2016. The exchange of information clause in the DTT’s is available.

n/a

12



13


• TP documentation is mandatory for all persons having transactions with associated enterprises. CbC reporting implemented with effect from April 2016. A three tier approach documentation has been implemented:

- Master File - Local File - CbC Report

n/a

14

Dispute resolution • APAs, safe harbour rules, dispute resolution panel and MAP are all available n/a

15



42


1

Digital economy

• The European commission’s work on the VAT system in Europe is progressing in tandem with the BEPS Project, e.g. the introduction of the MOSS scheme applies the destination principle of taxation. Since 1 January 2015 Ireland has treated the place of consumption as the place where VAT arises. Ireland has implemented the VAT MOSS scheme for digital supplies as per EU VAT Directive.

• Ireland will continue to follow the European commission proposals with regard to VAT and applying the destination principle to taxation of digital services

2

Hybrids

• No specific action taken yet other than to note that hybrids are mainly used for genuine reasons, such as regulatory requirements or funding structures however where such structures are used to gain a tax advantage and to supports the work undertaken in relation to hybrids. Ireland is keen to ensure that any proposals do not result in unintended consequences that have a detrimental commercial effect in which case it will make its position known through commentary on any such proposed new rules.

• Ireland will continue to follow and comply with international developments on hybrids.

3

CFC’s • Currently, Ireland has no CFC legislation but by 31 December 2018 at the latest

Ireland is required to adopt these rules as an EU member state under the EU Anti-Tax Avoidance Directive (“EU ATAD”). Ireland currently taxes once monies are remitted.

• Ireland will continue to monitor requirements for CFC legislation.

4

Interest deductions

• There is existing legislation regarding deductibility of interest, and it is noted that any further recommendations would need to be brought in line with other potential reforms. There are no thin capitalization rules in Ireland. EU ATAD does require interest restriction rules to be implemented where existing national rules are deemed to be not as effective as Action Point 4.

• Ireland already has significant legislation in place in this regard. However, if this is found to not be effective, Ireland may be required to introduce new legislation by 31 December 2018.

5


• Ireland is fully implementing OECD exchange of information requirements in respect of tax rulings as agreed in BEPS Action 5. The Knowledge Development Box was introduced in Finance Act 2015 in a manner that fully complies with the international best practice agreed in BEPS Action 5.

n/a

Country Ireland

PKF member firm PKF FPM

Your contact Paddy Harty Email [email protected]


43


6

Prevent treaty abuse • It appears Ireland has concerns over the wording of the specific model articles for

inclusion as it could cause significant issues for smaller countries. The OECD has acknowledged these concerns and it has been agreed further work is needed in this area.

• Action 6 is due to be implemented towards the end of 2016, early 2017 by way of Action 15 which is concerned with the multilateral instrument. Having a PPT included in DTT’s is Ireland’s preferred option.

7

PE status • Finance (No 2) Act 2013 and Finance Act 2014 resulted in new Irish incorporated

companies having default Irish tax residence. In July 2016, Ireland agreed to adopt the European Commission’s Anti-Tax Avoidance Directive.

• As yet nothing concrete although Action 7 is due to be implemented towards the end of 2016, early 2017 by way of Action 15.

8

TP - intangibles

• Ireland’s regime is in line with arm’s length principle. The definition of intangibles has expanded and there have been significant changes governing which group company is entitled to the income from intangibles. Income on intangibles will be determined based on where the developing, enhancing, maintaining, protecting and exploiting activities are carried out

• Patent Box/Knowledge Development Box introduced in Finance Act 2015.

• In May 2016, new TP rules were agreed at the OECD. Ireland is now considering what changes are needed to ensure that Ireland’s TP rules meet the standards set out in the OECD TP guidelines.

9


• Ireland’s Companies Act 2014 places greater responsibility on Directors over the tax compliance of certain companies. Ireland has agreed in July 2016 to adopt the European Commission’s Anti-Tax Avoidance Directive.

• In May 2016, new TP rules were agreed at the OECD. Ireland is now considering what changes are needed to ensure that Ireland’s TP rules meet the standards set out in the OECD TP guidelines.

10

TP – other high-risk transactions • See Action Point 9

• As above

11


• Ireland has adopted a Mandatory Disclosure regime under which promoters and taxpayers must provide information to Revenue on certain transactions which give rise to a tax advantage. Irish Revenue has also signed up to a number of different international information sharing initiatives with the EU, OECD and US including the EU’s DAC on tax transparency.

• Irish Revenue is continuing to work on the implementation of DAC 3 dealing with exchange of information.

12


• Ireland has concluded TIEA with 25 Countries. • Ireland will continue to adopt best

practice approach as stipulated by OECD.


44


13


• CbC legislation was implemented in Finance Act 2015 and provides for mandatory reporting for multinationals as a result of the BEPS recommendations. Ireland signed a Multilateral Competent Authority Agreement in January 2016 to share these reports with other tax authorities. In 2015, Ireland adopted the Commission’s fourth AML Directive which provides for greater transparency on beneficial ownership of companies and trusts. On 23 June 2016 Revenue published FAQs on CbC reporting to clarify the requirements of Action 13. Some of the issues covered by the documents are (i) the interpretation of CbC reporting legislation, (ii) filing obligations, (iii) the appointment of surrogate parent entities, (iv) the information to be included in a report, (v) the secondary reporting mechanism and (vi) equivalent CbC reporting.

n/a

14

Dispute resolution

• Ireland’s bilateral APA programme is effective from 1 July 2016 and applies to bilateral APA applications made to Revenue on or after this date. Therefore, the Revenue guidelines do not apply to:

- Bilateral APAs signed before 1 July 2016, - Formal bilateral APA applications that have been submitted to Revenue before 1 July 2016 (but in

respect of which an APA has not been concluded as of 1 July 2016) and - Unilateral APAs, i.e. agreements solely between the taxpayer and Revenue and not involving

another competent authority. • The programme applies only to TP issues (including the attribution of profits to a PE) and is conducted

within the legal framework of the DTT that Ireland has entered into with the other jurisdiction concerned. An application may be made by a company that is tax resident in Ireland for the purpose of the relevant treaty and also by a PE in Ireland of a non-resident company in accordance with the provisions of the relevant treaty. The bilateral APA programme is intended to apply in respect of a transactions where the TP issues are complex, e.g. where there is significant doubt about the appropriate application of the arm’s-length principle or where there would otherwise be a high likelihood of double taxation.

• Where the TP issues involve more than two tax jurisdictions, of which Ireland is one, the Revenue will consider entering into a series of bilateral APAs. The bilateral APA programme is voluntary: taxpayers can choose whether or not to enter into it.

• Action 14 is due to be implemented towards the end of 2016, early 2017 by way of Action 15 concerning multilateral instruments.

15 Multilateral instrument

• Multilateral instrument expected to be finalized late 2016 or early 2017 and will then be used to implement other action points as outlined above. n/a

On 11 October 2016 the Minister for Finance presented Budget 2017 and committed to meeting the best new international tax standards. A review of Ireland's CIT code was also announced and will include consideration of what further actions Ireland may need to take to ensure it is fully compliant with the OECD BEPS recommendations. The Finance Bill was published on 20 October 2016 and the Finance Act is expected to be published in late December / early January. The Finance Act will give legislative effect to changes announced in the Budget.


45


1

Digital economy • No specific action taken yet

• A proposed law aims to introduce a ‘virtual’ PE, triggered when a non-resident has online annual activities exceeding EUR 5 million

• A 25% WHT is proposed on consideration paid by Italian residents for online purchases of goods and services from non-residents

2

Hybrids

• Italian tax rules already prevent the mentioned effects under said mismatch arrangements.

• In July 2016, the Italian Tax Code has introduced an anti-avoidance provision whereby foreign hybrid instruments can be treated in Italy as debt /equity only if the relevant proceeds are fully/partially taxable in the foreign Jurisdiction (or the same proportion if the deduction is partial)

n/a

3

CFC’s

• According to the already in force Italian CFC rules, the profits realized by a non-resident company with tax residence in a tax haven country are taxable on accrual basis unless at least one of the two following exceptions are met : (i) the ultimate Italian shareholder is able to prove that the CFC “mainly and effectively” carries on an effective trading or industrial business in its country of tax residence (ii) the Italian shareholder can prove that the establishment of the CFC in the low-tax country was not tax-motivated

• New definition of tax haven country for CFC purposes which applies to all jurisdictions (other than an EU or EEA country that has concluded an exchange of information agreement with Italy) having a nominal CIT rate lower than 50% of the Italian tax rate

n/a

Country Italy

PKF member firm PKF MGP Studio Tributario e Societario

Your contact Marco Giuliani Email [email protected]


46


4

Interest deductions

• Interest expenses are deductible up to an amount equal to interest income accrued in the same tax period. Any excess over that amount is deductible up to 30% of EBITDA of the company. There is no possibility to transfer the surplus of non-deductible interest expenses within Italian fiscal unit for foreign companies which meet the requirements for the national consolidation

• Italian relevant tax rules are already in line with those recommended by BEPS.

5


6


• Generally, in order to prevent abuse, the DTT’s signed by Italy are applicable only if the recipient of the payment is the beneficial owner as defined by OECD guidelines

• No specific provisions have been included yet to tackle the double tax exemption, which may arise under certain circumstances

n/a

7

PE status • The definition of PE for Italian tax purposes follows in general terms the wording of article 5 of the OECD Model Tax Convention

• In all likelihood the BEPS changes brought at EU level will be reflected in domestic tax legislation

8




11

BEPS data collection • As of 2016, a new mandatory documentation CbC Reporting will apply to MNE’s;

• Detailed instructions on the CbC reporting data will be communicated by the Tax Authorities - expected to be published by end of 2016

12


• No specific action taken yet. However, it is expected that this will be implemented, as soon as results from initiative under action point 11 will be available

n/a


47


13


• From 2010, taxpayers are required to keep TP documentation evidencing how the TP were set forth.

• If, during the TP audit, the taxpayer provides duly kept and accurate TP documentation as set forth by the Italian tax authorities, no penalty will be charged even in case of TP adjustments

• As of 2016, a new mandatory documentation CbC Reporting will apply to MNE’s;

n/a

14

Dispute resolution • Italy implemented the possibility to apply for MAP in order to amicably resolve disputes about double taxations under DTT or TP rules n/a

15

Multilateral instrument • Italy joined the FATCA and CRS agreements which are aimed to fight the tax evasion through the AEOI between the countries n/a


48


1

Digital economy

• In accordance with the Act for Partial Revision of the Income Tax Act and Other Acts (Act No. 9 of 2015), the Consumption Tax Act was partially amended with the revision of consumption taxation on cross-border supplies of services such as digital content distribution. The criteria for determining either domestic or foreign transactions has been revised from the location of the office of the service provider associated with providing such services to address of the service recipients

n/a

2

Hybrids • In accordance with 2015 tax reforms in Japan, foreign dividend exclusion rule was revised based

on the BEPS action plan. Purpose of this reform is avoidance of double non taxation for dividend between countries

n/a

3

CFC’s • In accordance with 2015 tax reforms in Japan, the CFC rule Anti-Tax Haven rule was revised

• Income earned by CFC’s must be included in the Japan shareholder’s taxable income under certain circumstances

4

Interest deductions

• There are the following rules for interest deductions in Japan: TP taxation The thin capitalisation rule will disallow deductions for the portion of gross interest to foreign shareholders applicable to debt which exceeds three times the amount of capital The earnings stripping rules will disallow deductions for net interest payments to foreign related persons in excess of 50% of adjusted taxable income. If both the earnings stripping rules and the thin capitalisation rules are applicable in a fiscal year, only the larger of the disallowed amounts under either will be applied.

n/a


6

Prevent treaty abuse • In accordance with 2015 tax reforms in Japan, special measures to impose income tax on

unrealized capital gains on financial assets held by an individual at the time of departure from Japan was adopted

• There is LoB rule or PPT rule in the DTT with some countries

Country Japan

PKF member firm PKF HIBIKI Audit Corporation

Your contact Seiji Doko, Masahiko Tomita, Hironori Okada, Miho Ishihara

Email [email protected], [email protected], [email protected], [email protected]


49


7 PE status • In accordance with 2014 tax reforms in Japan, the AOA for attribution of profit to PE was adopted • PE is defined by tax law.

8

TP - intangibles • No specific action taken yet

• Intangibles are defined by tax law • There are TP administrative guidelines for following issues:

- Intangible properties to consider in examinations - Contribution to the formation, maintenance or development of

intangible properties - Cost contribution arrangement

9


10

TP – other high-risk transactions • No specific action taken yet

• There are TP administrative guidelines for following issues: - Transaction for the licensing of intangible property - Treatment of intra-group services


12 Disclosure of aggressive tax planning


13


• In accordance with 2016 tax reforms outline in Japan, TP documentation rules were introduced based on the BEPS action plan 13 regarding following issues:

- CbC Report - Master file - Local file

• There are TP administrative guidelines for the following documentation: - Documents that describe the capital relationship and details of

business of the corporation and each foreign-related party - Documents containing the details of foreign-related transactions - Documents used by the corporation for the calculation of arm’s

length prices

14 Dispute resolution • No specific action taken yet • Revised DTT with some countries includes treaty arbitration clauses

15 Multilateral instrument • Signed “Convention on Mutual Administrative Assistance in Tax Matters” in November, 2011

n/a


50

Action Point • Status of Action Point “In the pipeline” 1 Digital economy • No specific action taken yet n/a

2

Hybrids • Luxembourg implemented in 2015 the July 2014 amendment of the EU PSD disallowing the benefits of

the Directive (in essence participation exemption relief) if the “dividend income” gave rise to a “tax deduction” in the source country

n/a

3 CFC’s • No specific action taken yet. There are no CFC rules in Luxembourg n/a


5


• The IP regime is abolished with effect as of 1 July 2016. The existing IP regime will, however, remain available during a transitional period which ends on 30 June 2021 for: Qualifying IP rights which have entered the IP regime before 1 January 2016, and; Qualifying IP rights which have been acquired during the period from 1 January 2016 till 30 June 2016 to the extent that the qualifying IP rights have been acquired from unrelated parties, or if they are acquired from related parties, the IP rights benefitted upon their acquisition from the Luxembourg IP regime or from a similar foreign IP regime

• Qualifying IP rights that are acquired from related parties between 31 December 2015 and 1 July 2016 and that did not benefit from the Luxembourg IP regime or a similar foreign IP regime, the benefits provided for by the IP regime will only be available for 2016 income tax and 2017 net worth tax. Moreover, the Luxembourg tax authorities spontaneously inform competent foreign tax authorities about the persons benefitting from the Luxembourg IP regime in relation to qualifying IP acquired or constituted on or after 6 February 2015. The advance tax ruling process has been formalized as of the tax year 2015 and advance tax rulings are reviewed by a ruling commission.

• As of 1st January 2017 Luxembourg will automatically exchange all advance tax rulings and unilateral APAs covering cross-border transactions or situations, as well as under certain conditions, advance tax rulings and unilateral APAs covering cross-border transactions or situations that were issued, amended or renewed by the Luxembourg tax authorities between 1st January 2010 and 31st December 2016.

n/a

Country Luxembourg

PKF member firm PKF HRT Your contact Paul Leyder



51


6


7


8

TP - intangibles

• The advance tax ruling process has been formalized as of the tax year 2015 and advance tax rulings are reviewed by a ruling commission.

• As of 1 January 2017 Luxembourg will automatically exchange all advance tax rulings and unilateral APAs covering cross-border transactions or situations, as well as under certain conditions, advance tax rulings and unilateral APAs covering cross-border transactions or situations that were issued, amended or renewed by the Luxembourg tax authorities between 1 January 2010 and 31 December 2016.

• Draft law submitted to introduce a clear reference to the application of the OECD TP Guidelines as revised by actions 8 - 10 of the OECD BEPS Report.

9

TP – capital related high-risk transactions • No specific action taken yet


10



11


• Luxembourg tax authorities spontaneously inform competent foreign tax authorities about the persons benefitting from the Luxembourg IP regime in relation to qualifying IP acquired or constituted on or after 6 February 2015

• As of 1st January 2017 Luxembourg will automatically exchange all advance tax rulings and unilateral APAs covering cross-border transactions or situations, as well as under certain conditions, advance tax rulings and unilateral APAs covering cross-border transactions or situations that were issued, amended or renewed by the Luxembourg tax authorities between 1st January 2010 and 31st December 2016.

n/a


52


12



13 TP – documentation • No specific action taken yet

• A draft law introducing CbC reporting has been submitted to the Luxembourg parliament in August 2016. The draft law aims at transposing the EU Directive 2016/881.

14


15



53



2

Hybrids • The Netherlands implemented the July 2014 amendment of the EU

PSD effectively from 1 January 2016 disallowing the benefits of the Directive (in essence participation exemption relief) if the “dividend income” gave rise to a “tax deduction” in the source country

• The implementation of the EU Anti-tax avoidance Directive, which includes additional measures against hybrid mismatches, is required before 1-1-2019.

3

CFC’s • No specific action taken yet • The implementation of the EU Anti-tax avoidance

Directive, which includes additional measures against hybrid mismatches, is required before 1-1-2019.

4

Interest deductions • No specific action taken yet

• The implementation of the EU Anti-tax avoidance Directive, which includes additional measures against hybrid mismatches, is required before 1-1-2019.

• It is expected that a “consultation” document will be circulated mid 2017

5


• As of 2017, the access to the innovation box regime will be limited to patented IP and certain software only. Small caps (member of a group with < EUR 50 million revenue) will, within certain limits, remain permitted to apply the innovation box also with regard to non-patented (but otherwise qualifying) R&D. In addition, the nexus approach will be implemented meaning that the tax advantage will be limited to IP which is sufficiently developed in The Netherlands only. The EU Directive on AEOI between EU Member States will be implemented with effect as per 1 January 2017

n/a

6 Prevent treaty abuse • No specific action taken yet • The Dutch government has announced to welcome specific anti-abuse measures in new DTT negotiations.

Country Netherlands

PKF member firm PKF Wallast

Your contact Ruud van der Linde Email [email protected]


54


7

PE status • No specific action taken yet • The Dutch government has announced to

welcome the enhanced definition of PE in new DTT negotiations

8

TP - intangibles • Implemented in the Dutch Transfer Pricing Decree n/a

9


• Implemented in the Dutch Transfer Pricing Decree n/a

10

TP – other high-risk transactions • Implemented in the Dutch Transfer Pricing Decree n/a

11


12



13


• The Netherlands implemented additional TP documentation requirements as of January 1, 2016, including CbC-reporting requirements for large caps (member of a group with > EUR 750 million revenue) and minimum standards as regards TP documentation (master file, country file) for mid caps (member of a group with > EUR 50 million revenue) and large caps.

n/a

14


15



55



2

Hybrids • Portugal transposed into domestic tax law the July 2014 amendment of the EU PSD

disallowing the benefits of the Directive (in essence participation exemption relief) if the “dividend income” gave rise to a “tax deduction” in the source country

n/a

3

CFC’s • Portugal has adopted CFC legislation: profits of subsidiaries located in low-tax

jurisdictions are imputed and taxed at the level of the Portuguese shareholder, irrespective of dividend distributions

n/a

4 Interest deductions • Maximum allowed interest deduction: either EUR 1 million or 30% of adjusted EBITDA n/a

5


• GAAR allowing the tax authorities to ignore the legal form of an operation/structure and to tax according to substance

• Portuguese transposed into domestic tax law the January 2015 amendment of the EU PSD, disallowing the benefits of the Directive if arrangements or a series of arrangements are considered not genuine having regard all relevant facts and circumstances

n/a

6


• The transposition into domestic tax law of the January 2015 amendment of the EU PSD (see action point 5) also affects treaty abuse, to the extent that participation exemption rules (exempting dividend income and capital gains) are also applicable when the subsidiary / shareholder is resident in a country that has signed a DTT with Portugal

n/a


Country Portugal PKF member firm PKF & Associados, SROC, Lda.

Your contact José Ramos Email [email protected]


56


8


9


10


11

BEPS data collection • No specific action that we are aware of. However, the Portuguese tax authorities are used to exchange information with other tax administrations n/a

12


• Portuguese legislation imposes promotors (lawyers, tax consultants, accountants) involved in potentially aggressive tax planning schemes to communicate such schemes to the tax authorities (without identifying the client)

n/a

13


• Portuguese companies are required to maintain a local TP file • CbC tax documentation must be prepared by Portuguese ultimate holding

companies. CbC reporting is also required for Portuguese subsidiaries or a Portuguese branch, if such documentation is not prepared by another group company elsewhere

• Portuguese subsidiaries belonging to a group must identify the group company and country where CbC reporting is presented

n/a

14


15



57


1


2


3

CFC’s • No specific action taken yet n/a

4


5


6


7


Country Romania

PKF member firm PKF Finconta SRL

Your contact Florentina Susnea and Cristina Saulescu Email [email protected], [email protected]


58


8


9


10


11


12



13


14


15


Up until now, in Romania there is a Law project for adhering to BEPS Action Plan, but not concrete measures have been taken in this direction yet. However, it has been intensified the exchange of information with other fiscal authorities, but without the implementation of legislative measures in this regard.


59


1

Digital economy • No specific action taken yet

• In order to allow automatic exchange of financial account information with foreign countries for taxation purposes, in 2018 Russia plans to start implementing the MCAA on AEOI prescribed by the CRS.

2


3

CFC’s

• CFC rules were introduced to the Russian Tax Code on 1 January 2015. The new rules oblige individuals and legal entities to notify Russian tax authorities in case they control foreign companies, as well as to report and confirm CFC retained earnings which will be subject to taxation.

• Article 129.5 of the Tax Code of Russia will come into force starting from 2018 (in case of failure to pay or partial payment of tax due to exclusion of CFC profit from tax base). This article was not in effect for the 2015-2017 tax periods.

• The Tax Code of Russia allows inclusion of companies in the CFC list based on information obtained from foreign countries.

• Starting from September 2018 Russia plans to start implementing the MCAA on AEOI

• Russia plans to sign bilateral agreements on exchange of tax information with several offshore territories.

• Several bylaws are to be approved.

4

Interest deductions • Thin-capitalization rules and TP rules which limit interest deductions on loan

transactions between related parties are applicable in Russia. Payables to fellow subsidiaries are automatically recognized as controlled liabilities.

n/a

5

Harmful tax practices • Not available to the public n/a

Country Russia

PKF member firm PKF MCD

Your contact Tatiana Gavrilova, Ekaterina Batalova Email [email protected]; [email protected]


60


6

Prevent treaty abuse • It is forbidden to enjoy treaty concessions in case a company receiving money from Russia is an intermediary which then transfers the earnings to offshore territories n/a

7


8


9


10


11


12


• Taxpayers are obliged to disclose information about beneficial owners and CFCs n/a

13


14


15



61



2

Hybrids

• Effective 1 January 2016, Slovakia implemented the new CFC rule. In general, dividends paid from the distribution of profits after 2003 are not subject to taxation in Slovakia, but only to the extent that such profits are not deductible for the subsidiary distributing such profits

• Effective 1 January 2017, dividends paid to individuals and legal entities will be taxed (for legal entities only income paid by or to non-treaty countries). The following will be subject to taxation:

- Dividends and other distribution of profits including income paid to “silent partners” in the tax period beginning at earliest 1 January 2017

- Assets remaining after liquidation of a company or cooperative if either of them is being liquidated from 1 January 2017 or if a court rules on the dissolution of a company after 1 January 2017

- Any settlement defined in the regular separate financial statements for the reporting period beginning 1 January 2017

• The personal tax rate is 7%, 35% for non-treaty countries or according to the relevant DTT

3 CFC’s • No specific action taken yet n/a

4

Interest deductions

• Thin capitalization rules were reintroduced on 1 January 2015, although not directly, as part of the implementation of the OECD BEPS Action Plan. Between 2004 and 2014 there were no limitations on tax deductions for both related and unrelated party interest expense and economically equivalent payments. As of 1 January 2015, there is a limitation of tax-deductible interest from loans provided by local and foreign related parties and hereto related expenses equal to 5% of EBIDTA

• No carry-over of “excess interest” is allowed

n/a

Country Slovakia

PKF member firm PKF Slovensko s.r.o.

Your contact Soňa Ugróczy Email [email protected]


62





8 TP - intangibles • No specific action taken yet n/a




12 Disclosure of aggressive tax planning • No specific action taken yet n/a

13

TP – documentation • In Slovakia, all the taxpayers conducting related-party transactions (either domestic or cross-border) are obliged to prepare and maintain TP documentation to a certain extent n/a

14 Dispute resolution • No specific action taken yet n/a

15 Multilateral instrument • No specific action taken yet n/a


63


1


2


3

CFC’s • No specific action taken yet n/a

4


5


6


7


Country Slovenia

PKF member firm PKF d.o.o., Ljubljana

Your contact Tomaž Lajnšček, Primož Pečnik Email [email protected]


64


8


9


10


11


12

Disclosure of aggressive tax planning • No specific action taken yet n/a

13

TP – documentation • No specific action taken yet

• Slovenia signed the MCAA for the automatic exchange of CbC reports on 27/01/16. The MCAA will enable consistent and swift implementation of new TP reporting standards developed under Action 13 of the BEPS Action Plan.

14


15



65


1

Digital economy • As from 1 June 2014, VAT legislation has been enacted to impose an

obligation on foreign suppliers of electronic services to register and charge VAT

• As this is fairly new legislation, its effectiveness will have to be reviewed before any significant changes can be made

2

Hybrids • Various complex anti-avoidance provisions exist which deal with hybrid instruments aimed at particular transactions

• The Davis Tax Committee has recommended that the anti-avoidance provisions be broadened to cover a range of transactions without undue technicality

3

CFC’s • South Africa has extremely complex and constantly evolving CFC legislation • Simplifying the aforesaid highly complex legislation

4

Interest deductions • As from 1 January 2015, income tax legislation has been enacted to limit

the interest deduction in respect of certain transactions where the recipient of interest is not subject to tax in South Africa

n/a

5

Harmful tax practices • South Africa currently has a headquarter regime as well as an incentive for companies operating in special economic zones

• The Davis Tax Committee express concern with these regimes and recommend minimum substance requirements have to be incorporated into these regimes

6

Prevent treaty abuse • GAAR exist which prohibit treaty abuse such as treaty shopping etc.

• Various DTT’s are being renegotiated by the South African Government with various countries such as Germany, Lesotho, Malawi, Namibia, Singapore, Zambia and Zimbabwe

7 PE status • No specific action taken yet, recent case law dealt with interpretation n/a

Country South Africa

PKF member firm PKF Durban Your contact Paul Gering



66


8

TP - intangibles

• General TP rules anti-avoidance provisions exist to ensure prices are at arm’s length. Specific anti-avoidance provisions exist which deny the deduction of royalty payments where the IP is licensed in South Africa but has been exported

• Exchange control regulations also limit the exporting of IP and require approval of royalty rates payable abroad

n/a

9


• General TP rules/thin capitalisation anti-avoidance provisions exist to ensure prices are at arm’s length n/a

10


• General TP rules anti-avoidance provisions exist to ensure prices are at arm’s length n/a

11


• The USA FATCA Intergovernmental Agreement is an agreement between the governments (tax administrations) of the USA and the Republic of South Africa to exchange information automatically under the provisions of the DTT between these countries. The Standard for AEOI in tax matters (CRS) is the Global Model for AEOI under the MCAA of which South Africa is a signatory

• The CRS is a standardised automatic exchange model, which builds on the FATCA IGA to maximise efficiency and minimise costs, except that the ambit is now extended to all foreign held accounts and not only those of US citizens. South Africa is also one of the early adopters of the CRS and is committed to commence exchange of information automatically on a wider front from 2017, together with over 90 other jurisdictions

• The primary legislative framework for AEOI, including FATCA and the CRS, is largely in place, barring one or two amendments that, if deemed necessary, will be implemented in the near future

12


• South Africa legislation places an obligation on facilitators of tax schemes to disclose certain types of transactions to the revenue authority. These transaction types are listed as reportable arrangements

• The list of reportable arrangements will be extended to encompass additional transaction types that the revenue authority views as being high risk

13

TP – documentation • Currently it is not mandatory for TP documentation to be maintained

• Draft regulations have been issued requiring TP documentation, as prescribed in the regulation, to be retained by groups with a minimum consolidated SA turnover of R1 billion


67


14

Dispute resolution • MAP can be followed to resolve international tax disputes n/a

15

Multilateral instrument

• A multilateral convention on mutual administrative assistance on tax matters (as amended by the protocol) was entered into with date of entry into force of 1 March 2014

• A multilateral African Tax Administration Forum Agreement on Mutual Assistance in Tax Matters and a multilateral Southern African Development Community Agreement on Assistance in Tax Matters was also signed and ratified in South Africa but has not yet come into effect

• Various tax exchange of information agreements have also been entered into. These include Argentina, Bahamas, Barbados, Belize, Bermuda, Cayman Islands, Cook Islands, Gibraltar, Guernsey, Jersey, Liberia, Liechtenstein and San Marino

• New tax information exchange of information are in the process of negotiation with Andorra, Brunei Darussalam, Costa Rica, Dominica, Grenada, Isle of Man, Jamaica, Macao SAR, Marshall Islands, Monaco, Samoa, St. Lucia, St Kitts and Nevis, Turks and Caicos Islands and Uruguay


68


1

Digital economy • No specific action taken yet • PE consideration will include

“significant digital activities” definition

2

Hybrids

• Expenses derived from controlled transactions will not be deemed as tax-deductible in case the related counterparty considers the related income as tax exempt or with an effective tax rate below 10%. The exemption for avoiding double taxation will not apply for dividends where the distribution gives rise to a tax deductible expense

• EU PSD amendment has been implemented, disallowing the benefits of the Directive when transactions are only aimed to achieve a tax relief

• Specific rule against profit-participating loans interest deduction

n/a

3

CFC’s

• Income derived from foreign subsidiaries is imputed provided that: A participation >50% is held; A source tax rate applicable to such income is <75% of the applicable Spanish tax rate

• UCITs under Directive 2009/65/CE are excluded if incorporated and domiciled in a EU Member State

• A deep review of CFC legislation is expected

4

Interest deductions

• Net financial expenses are only tax-deductible up to the higher of EUR 1.000.000 or 30% of EBITDA

• Financial expenses within groups of companies aimed to (i) acquire shares of other companies or (ii) perform capital contributions to other companies of the group, will not be tax-deductible unless a valid economic reason other than achieving a tax relief is proven

n/a

5 Harmful tax practices • New measures aimed at specifically fighting harmful tax practices and artificial instruments leading to tax savings or designed for tax purposes n/a

6 Prevent treaty abuse • “Beneficial owner” clauses are being negotiated in new DTTs n/a

Country Spain PKF member firm PKF Attest

Your contact Gonzalo Vélez; Álvaro Beñarán; Isidro Brevers Email [email protected]; [email protected]; [email protected]


69


7

PE status • No specific action taken yet • PE consideration / definition will be reviewed

8


9


10


11


12



13


• TP documentation (Master and CbC files) should not be mandatorily filed but should be held at the disposal of the tax authorities if required Documentation requirements have been simplified for groups with a global turnover below EUR 45 million CbC report will be mandatory as of 2016 for groups with a global turnover exceeding EUR 750 million On 27 January 2016, Spain has signed the MCAA for the automatic exchange of CbC reports

n/a

14


15



70


1 Digital economy • No specific action taken yet. No changes in Swedish law until the EU VAT Directive will be changed n/a

2

Hybrids • Sweden does not have the proposed legislation. The Ministry of Finance is working on the question whether there should be changes in Swedish law or not n/a

3 CFC’s • Sweden already have legislation in this area. It differs somewhat from the report’s

recommendations. It is not clear whether the Swedish rules will be changed. The issue lies with the Ministry of Finance

n/a

4

Interest deductions • Sweden has rules that limit the deductibility of interest in some cases. A review of these

rules is ongoing within the framework of the so-called Corporate Tax Committee’s work. A proposal will probably be given during spring 2016. No proposal has yet been published.

n/a

5


• Sweden does not have any preferential tax regimes and does not provide any such preliminary covered by the report. Sweden will not send any information. However, Sweden will receive information on advance notice, as provided in other countries, where there is a transaction that affects one in Sweden and the preliminary decision includes a favorable tax regime. Information will be subject to confidentiality in Sweden

n/a

6

Prevent treaty abuse • No specific action taken yet. No matter how minimum standard becomes a part of the

DTT’s between Sweden and other countries, it is required that new treaties or amendments to treaties are approved by new legislation for it to apply in Sweden

n/a

7 PE status • No specific action taken yet other than the definitions followed in OECD Model DTT.

However, there is a need for a change in Swedish law. The issue lies with the Ministry of Finance

n/a

Country Sweden

PKF member firm PKF Revidentia AB

Your contact Karin Rosén Email [email protected]


71


8

TP - intangibles • Sweden has laws about how pricing will take place between associated enterprises. The

legislation is based the at arm’s length principle. No need for change in law n/a

9

TP – capital related high-risk transactions • See action point 8 n/a

10

TP – other high-risk transactions • See action point 8 n/a

11

BEPS data collection • The Tax Agency will monitor the area and developments to ensure that the BEPS implications are reflected in Swedish taxation n/a

12


• Sweden currently lacks rules on mandatory reporting for companies or advisers. The issue of such rules to be introduced is by the Ministry of Finance n/a

13

TP – documentation • Sweden has rules on TP documentation. It requires, however, a change in those rules to impose a minimum standard. A new law is expected to enter into force on 1 January 2017 n/a

14

Dispute resolution • Sweden meets the minimum standard. New amendments to tax treaties need to be approved by new legislation for it to apply in Sweden n/a

15

Multilateral instrument • Sweden participates in the group that will present a proposal on the joint agreement.

Whether Sweden signs a joint agreement or renegotiates its individual tax agreements needs to be approved by legislation to take effect in Sweden.

n/a


72


1

Digital economy • No specific action taken yet • Swiss tax reform III including BEPS matters pending: new

Switzerland federal tax law is expected as of January 2017 while new Switzerland cantonal tax law is expected as of 2019

2

Hybrids • No specific action taken yet • Swiss tax reform III including BEPS matters pending: new


3

CFC’s • No specific action taken yet • Swiss tax reform III including BEPS matters pending: new


4

Interest deductions • No specific action taken yet • Swiss tax reform III including BEPS matters pending: new


5

Harmful tax practices • No specific action taken yet • Swiss tax reform III including BEPS matters pending: new


6

Prevent treaty abuse • No specific action taken yet. • Swiss tax reform III including BEPS matters pending: new


7

PE status • No specific action taken yet • Swiss tax reform III including BEPS matters pending: new


Country Switzerland

PKF member firm PKF Consulting AG

Your contact Daniel Carotta Email [email protected]


73


8

TP - intangibles • No specific action taken yet

• Swiss tax reform III including BEPS matters pending: new Switzerland federal tax law is expected as of January 2017 while new Switzerland cantonal tax law is expected as of 2019

9

TP – capital related high-risk transactions • No specific action taken yet


10



11

BEPS data collection • No specific action taken yet • Swiss tax reform III including BEPS matters pending: new


12


• No specific action taken yet • Swiss tax reform III including BEPS matters pending: new


13

TP – documentation • No specific action taken yet • Swiss tax reform III including BEPS matters pending: new


14

Dispute resolution • No specific action taken yet • Swiss tax reform III including BEPS matters pending: new


15

Multilateral instrument • No specific action taken yet • Swiss tax reform III including BEPS matters pending: new



74


1


2


3

CFC’s • There is no CFC legislation in Thailand n/a

4


5


6

Prevent treaty abuse • No specific action taken yet. n/a

7


Country Thailand

PKF member firm PKF Thailand

Your contact John Casella Email [email protected]

https://www.google.be/url?sa=i&rct=j&q=&esrc=s&source=imgres&cd=&cad=rja&uact=8&ved=0ahUKEwjAp6nqlfHQAhUE6xoKHekABlgQjRwIBw&url=https://nl.wikipedia.org/wiki/Vlag_van_Thailand&psig=AFQjCNHMsbKy2mVAvPvq__GCX8_2zBuOgw&ust=1481718537959767


75


8


9


10


11


12


• Thailand has signed a memorandum of understanding concerning the compliance with the Foreign Account Tax Compliance Act (FATCA) with the US government

n/a

13

TP – documentation • There are no mandatory TP documentation requirements. Closely align

with the OECD TP guidelines, the domestic TP guidelines assist Thai tax authorities when conducting a TP audit.

• The domestic TP legislation is currently in draft and has not yet entered into force

14


15



76




3

CFC’s • CFC rules exist in Turkey. They apply where a resident company has at least a 50% interest in a non-resident company and certain other conditions apply n/a


5


• Any payment made in cash or via a bank account to a corporation (including a branch of a resident corporation) that is operational or established in a country regarded by the Turkish Council of Ministers to undermine fair tax competition (through other practices or taxation) may be taxed in Turkey through the application of withholding tax at a rate of 30%. The Turkish Council of Ministers has not yet determined which countries receiving payments will be considered ‘tax havens’. With respect to withholding tax, the Council of Ministers is granted the authority to determine the rate of taxation and specify the scope of work to be done with respect to payments made to purchase goods or participation stocks, for rent, for sea or air transportation, and payments which must be made for the completion of work done. However, while the authority is given to the Council of Ministers, there are two fundamental criteria regarding the determination of the countries which will be under the scope of such application. These are:

• Whether or not the taxation system of the other country to where the payments are transferred provides taxation opportunities as at the same level as the Turkish tax system; or;

• The information exchange mechanism • The Council of Ministers has not yet declared such a list of countries

n/a

Country Turkey

PKF member firm PKF İstanbul

Your contact Kadir Sayici – Mehmet Caltekin Email [email protected] – [email protected]

mailto:[email protected]


77


6


7


8

TP - intangibles • No specific action taken yet other than application of arm’s length principle on

related party transactions n/a

9



10


• No specific action taken yet other than application of arm’s length principle on related party transactions. n/a

11


12



13

TP – documentation • No specific action taken yet other than application of arm’s length principle on related party transactions n/a

14


15



78


1

Digital economy

• The UK implemented measures to treat the country of consumption as the place of supply of digital supplies for VAT purposes with effect from 1 January 2015

• The UK’s responses to action points 3 (CFCs), 7 (PE’s) and 8-10 (TP) are intended to also address other aspects of action point 1

• The UK’s Task Force for the Digital Economy will consult on other aspects of action point 1 to determine whether supplementary rules to tackle specific tax challenges are necessary and participate in future work with the OECD.

2

Hybrids • The UK has enacted new measures through legislation contained

in Finance Act 2016 to address hybrid mismatch arrangements with effect from 1 January 2017

n/a

3

CFC’s • The UK modernized its CFC rules in 2012 and the changes made

at that time used elements of the various approaches referred to in the OECD report, so no further changes are considered to be necessary

n/a

4

Interest deductions

• Following consultation, the UK intends to introduce new legislation which will take effect from 1 April 2017 to restrict relief for interest to 30% of EBITDA - a higher threshold will apply to groups of companies where their external borrowing exceeds 30% of EBITDA. Exemptions may apply where the total UK interest expense is less than £2 million per annum.

• On 12 May 2016 the UK government published its second consultation detailing the design of the new rules and proposed implementation. The consultation closed on 4 August 2016 and suggests implementation is to continue in the UK in a much shorter timeframe (2017) than the OECD (2020).

• Further announcements are expected in the UK following closure of the discussion document released by the OECD in July 2016

5

Harmful tax practices • Revisions to the Patent Box regime have been included in Finance

Act 2016 to implement ‘nexus principle’ in action point 5, with effect from 1 July 2016.

n/a

Country United Kingdom

PKF member firm PKF Cooper Parry

Your contact Stephen Bryan Email [email protected]


79


6


• The UK has been appointed to chair a group of over 90 countries which intends to develop a new instrument to allow tax treaties to be updated quickly and efficiently in order to implement various BEPS recommendations, including those in action point 6 regarding the abuse of treaties

• The instrument is intended to be complete and ready for signature by the end of 2016

7

PE status

• The new instrument referred to under action point 6 is also intended to be used to amend the definition of PE in double tax treaties, so that it accords with the OECD’s recommendations in action point 7

• The Diverted Profits Tax took effect from 1 April 2015 which counters certain arrangements where a foreign entity creates a presence in the UK which falls short of PE status

• The instrument is intended to be complete and ready for signature by the end of 2016

8

TP - intangibles

• Finance Act 2016 includes legislation which maintains the link between the UK tax legislation and the OECD’s updated TP guidelines

n/a

9 TP – capital related high-risk transactions • See action point 8 n/a

10 TP – other high-risk transactions • See action point 8 n/a


12


• On 5 September 2016 HMRC launched the Worldwide Disclosure facility. This is perceived as the final chance to encourage taxpayers to come forward before the AEOI under the CRS.

• On August 24, 2016, HMRC published a consultation on the Requirement to Correct, which will require taxpayers to fully disclose to HMRC any undeclared UK tax liabilities in respect of offshore interests. The goal of the consultation, which closes on October 19, 2016, is to require these taxpayers to disclose their tax affairs prior to the AEOI under the CRS.

• After September 30, 2018, the UK will introduce new and stricter sanctions under the Requirement to Correct.


80


13

TP – documentation • The UK has implemented CbC reporting regulations to give effect to

the recommendations in Action 13 with the first wave of reports being submitted by the end of 2017

• A critical amendment to the Finance Bill 2016 agreed by the UK Government in September 2016 now sees the prospect of public disclosure in the UK of MNEs' CbC reporting. The amendment allows HMRC to issue regulations for the requirement to disclose publicly. Further developments are expected

14

Dispute resolution • No specific action taken yet

• The UK is working with 19 other countries to develop and implement a provision in DTT which requires the use of mandatory, binding arbitration as a way to resolve cross-border double taxation disputes

15

Multilateral instrument • As noted under action point 6 above, the UK is working on a new instrument to allow for the quick and efficient updating of DTTs

• The instrument is scheduled to be ready for signature by the end of 2016


81


1

Digital economy • No specific action taken yet, as the US does not follow OECD n/a

2

Hybrids • No specific action taken yet, as the US does not follow OECD n/a

3

CFC’s • No specific action taken yet, as the US does not follow OECD n/a

4

Interest deductions • No specific action taken yet, as the US does not follow OECD n/a

5

Harmful tax practices • No specific action taken yet, as the US does not follow OECD n/a

6

Prevent treaty abuse • On 17 February 2016, the U.S. Treasury Department released a revised Model Treaty

which is the baseline text when it negotiates tax treaties. In the preamble, the 2016 Model Treaty incorporates recommendations of action point 6

n/a

7

PE status • No specific action taken yet, as the US does not follow OECD n/a

Country United States

PKF member firm PKF O’Connor Davies, LLP

Your contact Leo Parmegiani Email [email protected]


82


8

TP - intangibles • No specific action taken yet, as the US does not follow OECD n/a

9

TP – capital related high-risk transactions • No specific action taken yet, as the US does not follow OECD n/a

10

TP – other high-risk transactions • No specific action taken yet, as the US does not follow OECD n/a

11

BEPS data collection • No specific action taken yet, as the US does not follow OECD n/a

12


• No specific action taken yet, as the US does not follow OECD n/a

13


• Final CbC Regulations were issued in June 2016 designed to coordinate with the model CbC reporting template and instructions as per Action Item 13. The CbC information will be reported on new Form 8975 for periods beginning on or after June 30, 2016 and will be required for Ultimate Parent Entities of Multinational Enterprise groups that had on a consolidated basis, revenue of $850 million or more in the immediately preceding reporting period. IRS will allow voluntary filings called a “parent surrogate filing” for an earlier period to conform with the OECD start date.

n/a

14

Dispute resolution • No specific action taken yet, as the US does not follow OECD n/a

15

Multilateral instrument • No specific action taken yet, as the US does not follow OECD n/a

83

Note

84

Note


IMPORTANT DISCLAIMER: This publication should not be regarded as offering a complete explanation of the taxation matters that are contained within it and all information within this document should be regarded as general in nature. This publication has been sold or distributed on the express terms and understanding that PKF-VMB Accountants & Tax Consultants cvba (PKF-VMB) is not responsible for the results of any actions or inactions which are undertaken or not undertaken on the basis of the information which is contained within this publication, nor for any error in, or omission from, this publication. The publishers and the authors expressly disclaim all and any liability and responsibility to any person, firm, entity or corporation who acts or fails to act as a consequence of any reliance upon the whole or any part of the contents of this publication. Accordingly no person, entity or corporation should act or rely upon any matter or information as contained or implied within this publication without first obtaining advice from an appropriately qualified professional person or firm of advisors, and ensuring that such advice specifically relates to their particular circumstances. PKF-VMB is a member firm of the PKF International Limited’s family of legally independent firms and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms.

© PKF International Limited All Rights Reserved. Use Approved With Attribution.

OECD BEPS Action Plan Report - PKF International · 2017-01-11 · The content of the PKF OECD BEPS...

Documents

Transcript of OECD BEPS Action Plan Report - PKF International · 2017-01-11 · The content of the PKF OECD BEPS...