The International Monetary Fund (IMF) has released a Working Paper discussing the implications of the global minimum tax from the perspective of low-tax jurisdictions.
The paper argues that it is not possible to design a system that always guarantees generating exactly the bare minimum tax intended by the rules and motivates that this should not be the policy objective anyway. The paper notes that there is an opportunity to endorse a broader tax reform that can be beneficial for low-tax jurisdictions. The paper is authored by Shafik Hebous, Cory Hillier, and Andualem Mengistu. The Australian Taxation Office (ATO) has been successful in the Full Federal Court decision of Singapore Telecom Australian Investments PTY Limited (SingTel) vs Commissioner of Taxation.
The decision confirms SingTel claimed a transfer pricing benefit for deductions based on interest paid on loans between two of its subsidiaries regarding its acquisition of Optus in 2002. Deputy Commissioner Rebecca Saint said this decision is another substantial win for the ATO and the Tax Avoidance Taskforce. On March 21, 2024, the Australian Treasury released exposure draft legislation to implement a global and domestic minimum corporate tax rate of 15 percent.
The draft legislation is part of a global effort to prevent a race to the bottom on corporate income tax. The legislation ensures Australia will be among the lead jurisdictions implementing these global and domestic minimum taxes as a key part of the OECD/G20 Two‑Pillar Solution that was agreed in 2021. Comments on the draft law must be received by April 16. Members of the OECD/G20 Inclusive Framework on BEPS (Inclusive Framework) continue to make steady progress in the implementation of the BEPS package to tackle international tax avoidance, as the OECD releases the latest peer review report assessing jurisdictions' efforts to prevent tax treaty shopping and other forms of treaty abuse under Action 6 of the OECD/G20 BEPS Project.
A revised peer review document forming the basis of the assessment of the BEPS Action 6 minimum standard was also released today. The sixth peer review report on the implementation of the Action 6 minimum standard on treaty shopping, which includes data on tax treaties concluded by jurisdictions that were members of the Inclusive Framework on 31 May 2023, reveals that most agreements concluded between the members of the Inclusive Framework are either already compliant with the Action 6 minimum standard or will shortly come into compliance. On March 11, 2024, US President Joe Biden submitted the country’s 2025 Budget, including key international tax measures.
The Budget proposes to raise the corporate income tax rate to 28 percent, the corporate alternative minimum tax rate on billion-dollar corporations from 15 percent to 21 percent, and the tax rate on US multinationals’ foreign earnings from 10.5 percent to 21 percent. The Budget also seeks to reform international taxation by revising the global minimum tax regime, limiting inversions, and making related reforms; and adopting the undertaxed profits rule. It also seeks to revise the rules that allocate Subpart F income and GILTI between taxpayers to ensure that Subpart F income and GILTI are fully taxed, among other proposals. The OECD organized a transfer pricing capacity building workshop for representatives from 13 West African countries’ tax administrations, and from the Economic Community of West African States (ECOWAS) and the West African Economic and Monetary Union (WAEMU) Commissions.
The workshop was organized between March 5-7, 2024, in Ghana, as part of the Fiscal Transition Support Programme (FTSP) in West Africa. The workshop is the fifth in a four-year capacity building cycle that has created a network of some thirty West African transfer pricing experts. It follows on from the capacity building workshops held in Dakar and Lomé in 2023, and deals with the approaches that developing countries can consider adopting to prevent tax disputes between states, thereby strengthening legal certainty for businesses and improving the investment climate. The tax treaty between Croatia and Egypt entered into force on March 1, 2024.
The treaty applies from January 1, 2025, for withholding taxes. Further details will be provided when available. Bahrain and Hong Kong signed a tax treaty on March 3, 2024, in Manama.
Further details will be provided when available. The OECD has published public comments on a draft toolkit to support developing countries in addressing base erosion and profit shifting risks when pricing minerals (lithium).
The toolkit is designed to support developing countries in addressing the transfer pricing challenges faced when pricing minerals. The toolkit applies this transfer pricing framework as documented in Determining the Price of Minerals: A Transfer Pricing Framework to a specific mineral (lithium). The EU Council has removed Bahamas, Belize, Seychelles, and Turks and Caicos Islands from the list of non-cooperative jurisdictions for tax purposes.
With these updates, the EU list consists of the following 12 jurisdictions: American Samoa, Anguilla, Antigua and Barbuda, Fiji, Guam, Palau, Panama, Russia, Samoa, Trinidad and Tobago, US Virgin Islands, and Vanuatu. The Council invited these jurisdictions to improve their legal framework to resolve the identified issues. Bahamas has announced the introduction of the Qualified Domestic Minimum Top-Up Tax (QDMTT), a significant measure under the OECD’s Pillar Two tax framework aimed at ensuring multinational enterprises (MNEs) operating within The Bahamas pay their fair share of taxes.
The measure specifically targets MNEs with annual turnovers exceeding 750 million Euros, aligning with our international obligations and efforts to combat tax base erosion and profit shifting. Draft legislation is expected by the end of May 2024. Malta has transposed into local legislation the European Union's Global Minimum Tax Directive.
The rules are deemed to have come into force on 31 December 2023 but are restricted to the limited transposition of Chapters I, VIII, IX and of the directive, as the minimum measures that are relevant to ensure the proper functioning of the global minimum level of taxation for MNE groups and large-scale domestic groups. The rules apply to constituent entities (CEs) located in Malta that are members of an MNE group or a large-scale domestic group that has annual revenue exceeding EUR 750 million (including the revenue of excluded entities) in its ultimate parent entity’s (UPE) consolidated financial statements in at least two of the four fiscal years immediately preceding the tested fiscal year. Japan and Ukraine signed a tax treaty on February 19.
The treaty wholly amends the existing treaty between Japan and the Government of the Union of Soviet Socialist Republics, which entered into force in 1986. The treaty introduces measures for prevention of abuse, arbitration proceedings in mutual agreement procedures, assistance in the collection of tax claims, and reinforces exchange of information concerning tax matters. On 19 February 2024, the OECD/G20 Inclusive Framework on BEPS released the report on Amount B of Pillar One, which provides a simplified and streamlined approach to the application of the arm's length principle to baseline marketing and distribution activities, with a particular focus on the needs of low-capacity countries.
The approach set out in this report answers the call of low-capacity countries for what the African Tax Administration Forum (ATAF) has described as "vital" changes to the OECD Transfer Pricing Guidelines, providing what "could be a game changer for the African transfer pricing landscape". Content from the report has now been incorporated into the OECD Transfer Pricing Guidelines. The United Arab Emirates signed a tax treaty with Bahrain and Kuwait on February 11.
The treaties were signed at the eighth Annual Arab Fiscal Forum, held in Dubai. |
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