CFE’s Global Tax Top 5

BRUSSELS OCTOBER 2018

Australia: Tax Avoidance Taskforce collects $5.65 billion of additional revenue

The Australian Government Taxation Office (ATO) stated that the more detailed scrutiny of the tax affairs of multinationals, large corporations and wealthy individuals by the Tax Avoidance Taskforce (the Taskforce) had resulted in a collection of additional tax of $5.6 billion and raised over $10 billion within two years (Australian dollars).

“As a result of the Multinational Anti-Avoidance Law (MAAL), more than $7 billion in sales annually is expected to be returned to the Australian tax base. We have also seen more than half a billion dollars in extra GST paid in 2017-18 as a result of some global entities restructuring in response to the MAAL. We expect this will continue to grow,” Deputy Commissioner Mark Konza said.

The ATO stated that, as a direct response to the Multinational Anti-Avoidance Law (MAAL) and Diverted Profits Tax (DPT) reviews 44 taxpayers have brought or are bringing their Australian sourced sales back onshore.

Africa Revenue Report 2018: Tax revenues remain sustainable for African economies

The 2018 Report on Revenue Statistics in Africa reports that African economies have sustained gains in domestic resource mobilisation made since 2000. Providing internationally comparable data for 21 participating countries, the report finds that the average tax-to-GDP ratio was 18.2% in 2016, the same level as in 2015, which represents a strong improvement from 13.1% in 2000.

Revenue Statistics in Africa is a joint initiative between the African Tax Administration Forum (ATAF), the African Union Commission (AUC) and the Organisation for Economic Co-operation and Development (OECD) and its Development Centre, with the support of the European Union.

Digital Tax: OECD Update & EU Global Minimum Corporate Tax Rate Proposals

Providing an OECD tax policy update in October 2018, Pascal Saint-Amans, the Director of OECD’s Centre for Tax Policy and Administration, confirmed that the OECD is supportive of the German – French proposals for a global minimum tax rate, but countries still fundamentally disagree on how to address specific digitalisation challenges. Reportedly, the United States favours more comprehensive reform of international tax rules that would not ring-fence the digital economy for tax purposes but would reconsider taxation powers of market jurisdictions, whilst countries like the United Kingdom consider that international tax reform should remain limited in scope and address the user value contribution in the digital economy. The German Finance Minister Olaf Scholz (SPD) set out a proposal for a global minimum corporate tax rate to be applicable to multinational companies to address the tax challenges of the digital economy. Mr Scholz was considering these proposals jointly with France, with the main point of contention being whether such a tax would supplement or replace the Digital Services Tax imposed on revenues of digital businesses as discussed at present in the Council of the EU.

At a joint sitting of the European Parliament Economic & Monetary Affairs Committee (“ECON”) and the Special Committee on Tax Evasion, Tax Avoidance & Money Laundering (“TAX3”), French Finance Minister Bruno Le Maire urged MEPs to “stop the existing situation where digital giants pay 14 percentage points less in tax than other companies”. Le Maire conceded that Member States were not able to agree the proposed tax at present, but urged MEPs that the EU should lead the way when it comes to taxation of the digital economy.

However, there have been multiple reports over the past week concerning a letter allegedly sent by the US Senate Finance Committee to European Commission President Jean-Claude Juncker and European Council President Donald Tusk urging the EU not to progress the current interim digital tax proposal any further. The letter allegedly raises concerns relating to double taxation and discrimination against US tech companies, and urges the EU to instead focus efforts on reaching consensus at OECD level.

Recently both the United Kingdom and Spain have set out Budget proposals on introducing Digital Services Tax, pending international agreement at OECD level.

G7 Calls on OECD to Consider CFC Rules

The Group of Seven have called on the OECD to produce a policy paper setting out a proposed system of how multinational Controlled Foreign Corporations (“CFCs”) ought to be taxed, Bloomberg reports. The policy paper would further develop work carried out by the OECD as part of the Base Erosion and Profit Shifting project. The G7 reportedly are concerned with ensuring that a minimum level of tax is paid by multinational CFCs, and ensuring companies are prevented from “forum shopping” in order to artificially shift profits to low tax jurisdictions, potentially by having jurisdictions agree a global minimum corporate tax rate.

US Deputy Assistant Secretary of International Tax Affairs at the US Treasury’s Office of Tax Policy, Chip Harter, reportedly indicated it is possible that the US would be supportive of such a policy, given there are now CFC rules incorporated in the new US global intangible low-taxed income (GILTI) rules. Any OECD policy that is eventually adopted is also likely to extend the EU’s current CFC rules. Harter reportedly stated that discussions concerned the proposed policy paper are in the very preliminary stages.

Inter-American Centre of Tax Administrations and OECD promote stronger tax systems

The OECD and the Inter-American Centre of Tax Administrations (CIAT) hosted on 23 October a high-level event “Base Erosion and Profit Shifting Implementation: Strategic importance, challenges and opportunities” in Lisbon, Portugal. The event brought together more than 40 tax administration Commissioners, Director Generals and senior officials from CIAT and CREDAF member countries, with discussions focusing on the strategic importance of the work on BEPS in the current global tax context, including the importance of political will and open communications with all stakeholders.

Marcio Ferreira Verdi, Executive Secretary of CIAT, stated that “international co-operation and the exchange of experiences is fundamental to support the implementation of the BEPS Plan, in Latin America and the Caribbean, there are different success stories, which, like those in other parts of the world, are of great value to strengthen the public revenues of the countries in our region.”

The selection of the remitted material has been prepared by
Piergiorgio Valente/ Aleksandar Ivanovski/ Brodie McIntosh/ Filipa Correia

Brussels, 31 May 2018

Australia to Introduce Digital Tax

In his 2018 – 2019 budget delivery speech, Australian Treasurer Scott Morrison set out the government’s intention to introduce a tax targeting digital businesses, stating that “the next big challenge is to ensure big multinational digital and tech companies pay their fair share of tax”. He further stated that a discussion paper would be released in the coming weeks setting out different options as to how to tax the sector.

Morrison noted the decision to introduce this measure followed the government having worked closely with the OECD in the past year to attempt to reach international consensus concerning the issue of fair taxation of the digital economy.

Additionally, on 23 May the Australian Government introduced legislation targeting hybrid mismatches. The legislation aims to prevent multinationals from entering into arrangements designed to circumvent mismatch rules by using conduit entities to invest in Australia and thereby avoid taxation. It is expected the legislation will be passed in June 2018, and the draft legislation applies to income years starting from 1 January 2019.

ECJ Rule that the US Cannot Intervene in Apple State Aid Case

The Court of Justice of the European Union has upheld the decision of the European Union General Court, determining that the US could not establish the requisite interest needed in order to intervene in proceedings related to the decision of the European Commission taken in August 2016 that Apple’s Irish subsidiaries owed over 13 billion Euros in taxes for state aid incorrectly granted to Apple which artificially lowered the subsidiaries’ profits. The decision is currently being appealed by Apple subsidiaries in Ireland.

The US argued that tax revenues would be impacted by the recovery proceedings in Ireland, on the basis that foreign tax credits would likely offset US tax collected on future repatriation of profits. However, the CJEU upheld the decision of the General Court that the US could not prove the company would repatriate profits, and thereby could not establish the necessary direct interest to be able to intervene in proceedings.

In relation to the recovery of tax at stake in the dispute, Reuters has reported that the Irish Finance Minister has confirmed that Apple has now paid the first installment of 1.5 billion Euros into the escrow account set up to hold the 13 billion Euros of total disputed taxes until the dispute is finalised.

OECD Updates

In May, Saint Lucia, Bahrain and The United Arab Emirates became the 114th, 115th and 116th countries to join the OECD’s Inclusive Framework of minimum standards devised by the OECD and G20 countries as part of the 2015 Base Erosion Profit Shifting Plan (BEPS). The countries have thereby committed to implementing anti-BEPS minimum standards and peer review processes, as part of the OECD efforts to address tax avoidance.

Also this month, the OECD released peer reviews from the Country-by-Country reporting initiative which assess the legal and administrative framework and implementation of the OECD/G20 Base Erosion and Profit Shifting (BEPS) minimum standards of 95 Inclusive Framework jurisdictions as of January 2018. The OECD reports that the 60 of the 95 countries reviewed where MNEs have headquarters have implemented reporting obligations for those MNEs that are in line with the requirements of the BEPS minimum standards. Country-by-Country reporting exchanges under the BEPS minimum standards are to begin in June 2018. The OECD reports there are more than 1400 bilateral relationships to which the reporting exchanges will apply; a number that will continue to grow. This first peer review will be followed by two further annual reviews. The second review process began in April 2018 and will focus on the exchange of information aspect of Country-by-Country reporting.

Additionally, the OECD also released updates in May concerning reviews conducted by the Forum on Harmful Tax Practices (FHTP) in relation to compliance of preferential tax regimes of inclusive framework countries with OECD/G20 BEPS standards to improve the international tax framework, in accordance with BEPS Action 5.

Regimes from Lithuania, Luxembourg, Singapore and the Slovak Republic designed to comply with the standards were determined not to be harmful and met the transparency and exchange of information criteria. A further four regimes from Chile, Malaysia, Turkey and Uruguay were either abolished or require amendment to remove harmful features. 3 additional regimes, 1 from Kenya and 2 from Vietnam, were found not to pose a BEPS Action 5 risk and were accordingly held to be out of scope.

The FHTP have considered 175 regimes from over 50 jurisdictions since the Inclusive Framework was formed. From these regimes reviewed, 4 were found to have harmful features, 31 have been changed, 81 require legislative changes that are currently in progress, 47 were found not to pose any BEPS risk, and 12 are presently under review.

Full details of the regime reviews can be found on the OECD website at this link.

EU List of Non-Cooperative Jurisdictions in Taxation Matters

The Bahamas and Saint Kitts and Nevis have been removed from the EU’s list of non-cooperative jurisdictions in taxation matters aimed at promoting tax good governance and minimising tax avoidance. Following an assessment of commitments made to remedy EU concerns, the ECOFIN Council at its meeting on 25 May has now removed the two countries from the “blacklist”.  The Council noted that the commitments will be closely monitored.

Seven countries now remain on the list: American Samoa, Guam, Namibia, Palau, Samoa, Trinidad and Tobago and the US Virgin Islands.

UN Releases Updated Model Double Tax Convention

The 2017 update of the United Nations Model Double Taxation Convention between Developed and Developing Countries was published online on the occasion of the 16th Session meeting of the Committee of Experts on International Cooperation in Tax Matters convened in New York from 14 to 17 May 2018. The updated Model Double Taxation Convention incorporates changes which were approved in April 2017 by the Committee.

In a progress note circulated ahead of the Committee Session concerning the updates to the Convention, the Secretariat noted that the 2017 update incorporates language contained in the Base Erosion and Profit Shifting Project of the OECD and G20, aimed at preventing improperly obtained treaty benefits. In particular, the Secretariat noted the update incorporates new anti-abuse rules and a revised preamble setting out that “tax conventions are not intended to create opportunities for tax avoidance or evasion”.

Additionally, it was noted the update introduces an article which permits the imposition of a withholding tax relating to fees for technical services, identified in the note as a practice which increases source-based taxation.
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The selection of the remitted material has been prepared by
Piergiorgio Valente/ Aleksandar Ivanovski/ Brodie McIntosh/ Filipa Correia

 

Brussels, 27 April 2018

OECD Updates

The OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes, has published 9 peer review reports which assess the compliance of a country with international tax transparency standards. The Global Forum includes 150 members, including all G20 and OECD countries, as well as international financial institutions. Estonia, France, Monaco and New Zealand were rated as being “compliant” which the standards, whilst The Bahamas, Belgium and Hungary received a rating of “largely compliant”, and Ghana “partially compliant”. A supplementary report was also issued concerning Jamaica’s progress with tax transparency standards, in which it was attributed a rating of “largely compliant”.

Additionally, the OECD has published 14 transfer pricing country profiles, setting out current transfer pricing practices within each of those countries. The profiles are created using information provided by the nations themselves in responses to questionnaires, focussing on current legislation in that country concerning transfer pricing principles, and whether or not the country follows the OECD Transfer Pricing Guidelines. Concepts such as the arm’s length principle, transfer pricing methods and documentation are the particular focus of the profiles.

Profiles were published concerning Australia, China, Estonia, France, Georgia, Hungary, India, Israel, Liechtenstein, Norway, Poland, Portugal, Sweden and Uruguay respectively, and the profiles for both Belgium and the Russian Federation were updated. Profiles are now available for 44 countries.

Additionally, the United Kingdom announced this month proposed changes to remedy errors and omissions to the list of reservations and notifications made by the UK when it signed the OECD’s Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). It proposes to add to its list of countries with treaties to be modified the Faroe Islands, Kyrgyzstan, the United Arab Emirates and Ukraine. It has also proposed to remove Germany from the list, on the basis that the countries have since implemented BEPS provisions through bilateral agreement.

Further, Montenegro stated in a press release on 13 April that it intends to join the MLI. The MLI will enter into force on 1 July 2018 on the basis of it having now been ratified by 5 of the signatory countries.

Japan has also this month enacted tax reform legislation modifying the definition of a permanent establishment under domestic law to implement the recommendations for Action 7 of the OECD BEPS project.

US to Amend Country-by-Country Reporting Regulations & Agreements

The US have announced that guidance concerning country-by-country reporting obligations for large multinationals will be amended on the grounds of national security. The current US regulations, which implement the OECD BEPS transfer pricing tax avoidance action plan, previously set out that reporting requirements apply to multinational groups headquartered in the US, with annual revenues of US $850 million or more. Effective immediately, multinational groups where 50% or more of revenue is derived from contracts with the US government intelligence or security agencies or the Department of Defence can identify in their reporting that they are a specified national security contractor. On that basis, those multinationals are only required to provide information in the reporting schedules concerning the parent entity company, with no other information required to be reported.

The US also announced on 19 April that the US and Austria have begun negotiations to establish a bilateral agreement that will allow for the exchange of country-by-country reports concerning large multinational companies. Similarly, on April 17 the US announced that negotiations with Indonesian tax authorities had commenced concerning the exchange of country-by-country tax reports on multinational firms.

OECD Reports on Taxation of Personal Savings and Wealth

The OECD have made public reports on The Taxation of Personal Savings, and The Role and Design of New Wealth Taxes. The first report reviewed taxation policy in over 35 OECD countries in relation to savings vehicles, such as bank accounts, shares, pensions and housing. The analysis demonstrated that differences in tax treatment for these vehicles often favour wealthier taxpayers, who largely hold their wealth in those with lower tax rates, such as investment or pension funds and shares, whereas less wealthy taxpayers often hold their savings in highly taxed bank accounts. The report supports the argument for preferential tax treatment for retirements savings, given aging population issues facing most nations, and the potential impact this will have upon social benefits.

The second report concerning net wealth taxes concluded that where a country has appropriate personal income taxes, capital gains taxes, inheritance or gift taxes there is little indication that a wealth tax is required. However, where inheritance tax is not levied and capital income taxation is low, there may be scope for such a tax.

India and Kazakhstan Tax Treaty Enters Into Force

A tax treaty between India and Kazakhstan has now entered into force, India’s Central Board of Taxes announced on 13 April. The treaty updates the previous 1996 agreement, and specifically allows double taxation relief in relation to transfer pricing, as well as setting out new permanent establishment provisions. In addition, the treaty updates provisions concerning the exchange of information for tax purposes.

China Reduces VAT Rate

On 4 April, China announced a 1% reduction of the top two VAT rates in the country, as well as an increase of the current threshold for so-called general VAT taxpayers. It is expected that this will be of great benefit to SME enterprises, who under the present regime if classified as a general VAT taxpayer as are not able to deduct input VAT against output VAT. The threshold for a general VAT taxpayer has been increased from a turnover of RMB 500,000 to 5,000,000. It is expected this reform will stimulate the growth of manufacturing and start-up businesses in particular, and will have a significant economic impact, equal to that of US tax reform.

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The selection of the remitted material has been prepared by

Piergiorgio Valente/ Aleksandar Ivanovski/ Brodie McIntosh/ Filipa Correia

 

Issue 3 2018 – Brussels, 30 March 2018

OECD Interim Report on Tax Challenges Arising from Digitalisation

The OECD has published its Interim Report on Tax Challenges Arising from Digitalisation, which concludes that no agreement can presently be reached among the Inclusive Framework countries on either the implementation of short-term interim measures to tax the digital economy, or long term measures of identifying characteristics of digital businesses, and the extent to which those features contribute to value creation and should therefore be subject to a digital tax.

However, OECD Inclusive Framework members have agreed to undertake a review of the nexus and profit allocation rules concerning allocation of taxing rights between jurisdictions, and the impact of digitalisation on the economy. To that end, and in order to improve international taxation rules to be better fit for purpose concerning the taxation of the digital economy, the OECD aims to produce a final report in 2020.

EU Commission Proposals for Taxation of the Digital Economy

The European Commission has now published draft directives concerning taxation of the digital economy.

  • Interim Measure/Directive on DST: Tax on gross revenue

The draft interim measure, the Directive on Digital Services Tax (“DST”) proposes to implement a short term interim turnover tax on digital businesses operating in the Single Market, on the aggregated gross revenue of digital businesses at 3%. The levy would apply to digital firms with global revenue above €750 million, and annual EU revenue of €50 million or more, with no deduction of costs, to apply to revenue made from targeted advertising based on user data collection and digital intermediation services of making available digital marketplaces. Revenue contemplated to be within the scope of the proposed tax includes services of data collection for the sale of targeted advertising, and intermediation services of making available digital marketplaces. The tax would require self-reporting of the relevant data for calculating revenue and place of supply. The tax is proposed to be collected making use of a “one-stop-shop” model.

  • Long Term Measures/Digital PE: Revision of International Corporate Tax Concepts

The long term measure proposes revision of corporate taxation concepts of permanent establishment and profit allocation to account for digital activities. The directive proposes that the definition of permanent establishment should include a “significant digital presence”. A digital PE will be established when a platform either exceeds an annual turnover of €7 million, or has more than 100,000 users in a Member State in a taxable year, or has over 3,000 contracts for the provision of digital services in a taxable year, that would amount to a Digital PE.

  • Recommendations relating to Double Tax Treaties: The third proposal in the EU digital taxation package sets out recommendations to Member states to renegotiate and adapt their double tax treaties with 3rd countries (non-EU) by way of extending the scope of the PE concept to include significant digital presence (digital PE) through which the business of an enterprise is wholly or partly carried out.

The US recently set out its position that it does not believe digital business is so inherently different such that it warrants separate treatment by way of the creation of a special tax regime and the lack of agreement at OECD level.

US Impose Import Tariffs

In early March, US President Donald Trump announced plans to impose a 25% tariff on steel imports, and a 10% tariff on aluminium, in a move to protect and revive the American steel industry. After indications by Canada and the EU, among other countries, that retaliatory measures would be considered, with the EU also making public a list of products upon which tariffs may be imposed, the US have since announced that Canada, Mexico, Europe, Australia, Argentina, Brazil and South Korea will be temporarily exempt from the tariffs. Following the initial announcement of the steel tariff, China announced its own range of tariffs to be imposed on over $3 billion worth of US goods, including fresh fruit, wine and pork. The US has now announced a list of additional tariffs to be imposed on over $60 billion worth of Chinese imports, sparking fears of a so-called “trade war”. Temporary exemptions granted to some countries were conditional on their implementing measures that would assist the US address its trade deficit by 1 May. Negotiations concerning the detail of the measures are ongoing.

EU “Blacklist” of Non-Cooperative Jurisdictions

In March, three countries were removed and a further three countries added to the EU’s list of non-cooperative jurisdictions in taxation matters aimed at promoting tax good governance and minimising tax avoidance. Nine countries now remain on the list: American Samoa, Bahamas, Guam, Namibia, Palau, Samoa, Saint Kitts and Nevis, Trinidad and Tobago and the US Virgin Islands.

On 21 March, the Commission also published guidelines identifying countermeasures for the movement of EU funds through countries identified as non-cooperative tax jurisdictions. The guidelines detail the relevant legislation concerning transfers of EU monies in relation to non-cooperative jurisdictions, and provides a framework for assessing the risks of tax avoidance in projects involving entities in these jurisdictions. The legislation requires that EU funds do not support projects that contribute to tax avoidance, and that funding is routing according to good governance taxation standards.

BEPS Updates

In a significant milestone for the BEPS project, the OECD announced that the BEPS multilateral tax treaty instrument (“MLI”) will enter into force on 1 July 2018. This follows from the deposit of the fifth instrument of ratification by Slovenia. The other ratifying countries are Austria, the Isle of Man, Jersey and Poland. The multilateral tax treaty allows jurisdictions to update their existing double tax treaties and transpose measures agreed in the BEPS project without further need for bilateral negotiations.

Following on from BEPS Action 7 and the changes made to Article 5 of the OECD Model Tax Convention, the OECD has also published a report setting out guidance on how profit attribution rules should apply to permanent establishments. The guidance establishes high-level general principles concerning structures for sale of goods, online advertising and procurement, as well as guidance concerning permanent establishment and attributions of profits arising from anti-fragmentation rules.

Also in March, the OECD published Stage 1 Peer Review Reports assessing tax dispute resolution practices in Czech Republic, Denmark, Finland, Korean, Norway, Poland, Singapore and Spain. The reports examine compliance with best practice standards established in Action 14 of the BEPS plan concerning resolution of taxation disputes. The OECD has also now called for submissions concerning the 5th round of peer reviews relating to Estonia, Greece, Hungary, Iceland, Romania, Slovak Republic, Slovenia and Turkey, to be provided via completion of a taxpayer input questionnaire, with a deadline of 9 April 2018.

 

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The selection of the remitted material has been prepared by

Piergiorgio Valente/ Aleksandar Ivanovski/ Brodie McIntosh/ Filipa Correia

Issue 2 2018 – Brussels, 28 February 2018

US – Digital Economy Does Not Warrant Special Tax Regime

Chip Harter, Deputy Assistant Secretary (International Tax Affairs) at the US Department of the Treasury, set out the US position concerning proposals to tax the digital economy at a Tax Council Policy Institute conference held in Washington over 15 to 16 February. Mr Harter stated that the US does not believe digital business is so inherently different such that it warrants separate treatment by way of the creation of a special tax regime.

Harter stated the US is open to discussions as to whether benchmarks concerning permanent establishment and profit attribution should be revised on a broader basis, but not as part of a special regime which is specific only to digital business.

These comments come ahead of the interim report concerning the implications of digital taxation that the Task Force on the Digital Economy (TFDE), a subsidiary of the CFA, is preparing to deliver to G20 Finance Ministers at the April 2018 meeting. Harter indicated that a consensus cannot be reached and that this will be reflected in the report.

OECD Updates

On 8 February the OECD issued additional guidance concerning the implementation of country-by-country reporting (CbCR) in accordance with Action 13 of the BEPS Project. The guidance states that total consolidated group revenue should be calculated on the basis of the same accounting standards used to identify the existence of a group for the purposes of CbCR. In addition, the guidance includes clarification concerning situations in which the non-compliance of a jurisdiction with the conditions of confidentiality, appropriate use or consistency with respect to CbCR may be considered a systemic failure of the jurisdiction to fulfil its obligations under an international agreement for the automatic exchange of CbCR.

The Global Tax Advisers’ Cooperation Forum submitted an opinion statement in January concerning the OECD consultation draft regarding proposed Mandatory Disclosure Rules requiring disclosure of avoidance arrangements and offshore structures.

Additionally, the OECD announced this month that Serbia has joined the Inclusive Framework on BEPS, bringing the total number of countries who have committed to work together to prevent multinational group tax avoidance and improve cross-border tax disputes to 112.

Nigeria, having ratified the Multilateral Component Authority Agreement on the Exchange of Country-by-Country Reporting Reports (CbC MCAA) in August 2016, has this month enacted Income Tax (Country-by-Country) Reporting Regulations 2018. These Regulations indicate compliance with Action 13 of the implementation plan of the OECD Base Erosion and Profit Shifting (BEPS) project.

Australia Proposes Draft Legislation Extending Multinational Anti-Avoidance Law 

The Australian government has issued draft legislation which proposes to extend current anti-avoidance law, by preventing taxpayers from using foreign trusts or partnerships in corporate structures to evade the current legislative application.

The current legislation was enacted in 2016, and was designed to prevent multinational entities with annual global income of AUD $1 billion or more, or that are a part of a group of entities that have annual global income of AUD $1 billion or more, from avoiding paying tax within Australia by constructing artificial arrangements with the aim of avoiding having a taxable presence in Australia.

The Australian Government in its explanatory memorandum indicated that the proposed legislation would ensure the current anti-avoidance legislation operates as intended.

Revision of the UK Intangible Fixed Assets Regime

The UK regime on corporate intangible fixed assets (IFA regime) is being revisited. The scope of the regime includes assets such as copyright, patents and trademarks as well as goodwill. It was first established in 2002 to equate tax and accounting treatment of such assets. In essence, it introduced relief for amortisation or impairment of the aforementioned assets. The revision is aimed at enhancing the efficiency and attractiveness of the regime. Concrete proposals concerning the revisions are expected in late 2018.

Digital Services Tax & Carbon Tax Introduced in Singapore’s 2018 Budget

In its 2018 budget, the Singapore government has announced that a goods and services tax will be imposed on digital services from 2020 onwards, with plans to raise the current rate of the GST to 9%, a 2% increase, between 2021 and 2025. This announcement reflects current ongoing international dialogue concerning using destination principles for the taxation of digital services. B2B services are to be taxed by a reverse charge mechanism, with B2C services to be taxed via overseas vendor registration, which will be compulsory for overseas suppliers of digital services to Singapore.

The government also announced a new carbon tax in the budget for those entities producing 25,000 tonnes or above of greenhouse gases annually, to apply from 2019. The proposed tax rate is S$5 per tonne of emissions, to increase to S$10 or S$15 per tonne by 2030. The tax will take the form of a fixed-price credits-based mechanism.

The budget did not introduce any proposed changes for Singapore’s corporate income tax rates.

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The selection of the remitted material has been prepared by

Piergiorgio Valente/ Aleksandar Ivanovski/ Brodie McIntosh/ Filipa Correia

 

EU removes eight countries from the tax ‘blacklist’

The Council of the European Union removed eight jurisdictions from the EU list of                       non-cooperative jurisdictions for tax purposes at the ECOFIN meeting of 23 January. Following commitments made at high political level to remedy the EU concerns, the EU finance ministers agreed to move these countries to a separate list, where they will be subjected to close monitoring: Barbados, Grenada, Republic of Korea, Macao SAR, Mongolia, Panama, Tunisia and the United Arab Emirates. The decision leaves 9 countries on the list of 5 December 2017, initially comprising 17 jurisdictions.

EU Commissioner Moscovici urged the Member states to publish the content of the commitment letters sent to the EU by the jurisdictions that are now on the grey list. Moscovici stated that these letters must be made public, so that everyone can judge these commitments. It was further submitted by the Commissioner that the credibility of this process depends on such transparency, with the Member states bearing the onus of this responsibility.

Thailand releases second draft of proposed e-commerce law along with public consultation

The redraft of the proposed e-commerce tax, notably, removes the proposal for a withholding tax or corporate income tax but rather focuses on bringing service providers of e-commerce transactions within the scope of VAT. The new proposals include requiring foreign companies providing services via electronic media to a non-VAT registered person in Thailand to register for VAT if their income exceeds a certain threshold. The foreign VAT registered service provider will be subject to certain specific conditions. In addition, a non-VAT registered person who is subject to the service fee of the foreign company will not be required to self-assess for the VAT.

South Korea to tax cryptocurrency

The Ministry of Finance in South Korea has indicated its intention to introduce a tax on cryptocurrency exchanges such as the Bitcoin exchange. It is reported that the tax will be in the region of 22% corporate income tax and 2.2% local income taxes on the previous year’s earnings. The tax will be imposed if the annual income of the exchange exceeds the threshold of $18.8 during 2016.

In addition, it was indicated by the Finance Ministry that the exchange would be required to share transaction data with banks, in an effort to increase tax compliance.

Hong Kong introduces two-tiered profits tax regime

Hong Kong is set to introduce a new corporate tax regime targeted at encouraging growth of SMEs in 2018. Under the proposed new rules a lower rate of corporation tax of 8.25% will be introduced on the first $2 million of profits with the balance taxable at the standard rate of 16.5%.

New measures will also be introduced aimed at encouraging investment in research and development. The first $2 million of expenditure will be eligible for a 300% tax deduction with the remained expenditure subject to a 200% tax deduction.

Panama signs OECD Common Reporting Standard Multilateral Competent Authority Agreement

Panama has become the 98th jurisdiction to become a signatory. Signatories affirm their commitment to the automatic exchange of financial account information under the OECD/G20 Common Reporting Standard. The first set of exchanges are due to commence in September 2018. By becoming a signatory Panama will be in a position to activate bilateral exchange relationships with the other signatories.

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CFE’s Global Tax Top 5 is edited by Piergiorgio Valente

The selection of the remitted material is prepared by

Aleksandar Ivanovski/ Filipa Correia / Piergiorgio Valente/

Stella Raventós-Calvo / Wim Gohres