Buletin Informativ - nr. 18/2018: Top 5 noutati din domeniul fiscalitatii internationale
Brussels, 27 April 2018
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.
2.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.
3.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.
4.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.
5.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.