On February 28, 2022, the OECD released the third batch of 2021/2022 updates to the transfer pricing country profiles, reflecting the current transfer pricing legislation and practices of 28 jurisdictions.
The updated country profiles add new information on countries’ legislations and practices regarding the transfer pricing aspects of financial transactions and the application of the Authorized OECD Approach (AOA) on the attribution of profits to permanent establishments. In addition, the country profiles reflect updated information on a number of transfer pricing aspects such as methods, comparability, intra-group services, cost contribution agreements, transfer pricing documentation and administrative approaches to prevent and resolve disputes.
In August and December 2021, the OECD had released the first and second batches of updated transfer pricing country profiles. With this third batch, the profiles for Brazil, Canada, Chile, China, Croatia, Dominican Republic, Estonia, Finland, Greece, Hungary, Israel, Korea, Liechtenstein, Lithuania, Luxembourg, Malta, Panama, Portugal, Slovenia, the United Kingdom, Uruguay and the United States have been updated, and 6 new country profiles from OECD/G20 Inclusive Framework on BEPS Members (Honduras, Iceland, Jamaica, Papua New Guinea, Senegal and Ukraine) were added, bringing the total number of countries covered to 91.
Bahrain, Romania ratify BEPS MLI
On February 28, 2022, Bahrain and Romania deposited their instrument of approval or ratification for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (Convention or MLI), which now covers over 1800 bilateral tax treaties.
For Bahrain and Romania, the Convention will enter into force on 1 June 2022.
On 1 February 2022, over 880 treaties concluded among the 70 jurisdictions which have ratified, accepted, or approved the Convention had already been modified by the Convention. An additional 940 treaties will be modified once the Convention will have been ratified by all Signatories.
On February 25, 2022, the UK tax authority published final guidance on the Uncertain Tax Treatment legislation.
The legislation is intended to help reduce the legal interpretation portion of the tax gap by promoting early identification and disclosure to HMRC of tax uncertainties by large businesses in scope.
The Uncertain Tax Treatment notification requirement levels the playing field, promoting fairness in the system by requiring all uncertain tax treatments to be notified whilst promoting continued engagement with HMRC in an open and collaborative manner.
On February 24, 2022, the EU Council adopted conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes, deciding to maintain the following countries on the list: American Samoa, Fiji, Guam, Palau, Panama, Samoa, Trinidad and Tobago, US Virgin Islands and Vanuatu.
The Council regretted that these jurisdictions remain non-cooperative on tax matters and invites them to engage with the Code of Conduct Group in order to resolve the identified issues.
The revised list only includes countries that either have not engaged in a constructive dialogue with the EU on tax governance or have failed to deliver on their commitments to implement the necessary reforms. Those reforms should aim to comply with a set of objective tax good governance criteria, which include tax transparency, fair taxation, and implementation of international standards designed to prevent tax base erosion and profit shifting.
The OECD has published public input received on the draft rules for nexus and revenue sourcing under Pillar One Amount A.
On 4 February 2022, the OECD invited public comments on the Draft Rules for Nexus and Revenue Sourcing under Pillar One Amount A to assist members in further refining and finalizing the relevant rules.
The OECD said it is grateful to the commentators for their input and has now published the public comments received. The comments are available on OECD’s website.
Singapore presents Budget 2022
On 18 February 2022, Singapore’s Minister for Finance, Lawrence Wong, presented Budget 2022 to Parliament.
In the main, the government is exploring a minimum effective tax rate to top-up the effective tax rate of multinational groups operating in Singapore (with annual revenues of EUR 750 million or more) to 15%.
The Minister said: “Our corporate tax system will need to be updated due to global tax developments relating to the Base Erosion and Profit Shifting initiative.”
“At this stage, it is premature and difficult to determine the eventual fiscal impact of both pillars. As I mentioned just now, there will be a negative revenue impact under Pillar 1. METR might yield some additional tax revenue in the short term, but the eventual impact of Pillar 2 on our revenue will depend on how governments and companies respond.”
See Budget Statement
Iran, Finland sign tax treaty
Iran and Finland signed a tax treaty on February 7, 2022.
The tax agreement could enable Iran and Finland to restore their economic relations to the levels seen before the US sanctions hit trade between the two nations in 2018, Tasnim News Agency reported.
The tax treaty comes amid Iran’s efforts to provide certainty for business and trade activity and to strengthen economic ties with the rest of the world as the country uses increased trade revenues to offset the impacts of American sanctions on its crude exports, Tasnim News Agency reported.