On November 22, 2022, the OECD released the latest mutual agreement procedure (MAP) statistics covering 127 tax jurisdictions.
The statistics – which practically cover all MAP cases worldwide – form part of the BEPS Action 14 Minimum Standard, providing an objective and global frame of reference, as well as a country-specific view, which together allow measurement of progress but also show where further work is needed.
The 2021 MAP Statistics were presented during the fourth OECD Tax Certainty Day, where tax officials and stakeholders took stock of the tax certainty agenda and discussed ways to further improve dispute prevention and resolution.
On November 18, 2022, Malta gazetted Transfer Pricing Rules, 2022.
The rules provide for ascertaining the total income of a permanent establishment, situation in which the rules do not apply. The rules provide that the Commissioner may issue a unilateral transfer pricing ruling in order to provide certainty in relation to the application of these rules to a cross-border arrangement. Further, the Competent Authority may enter into an advance pricing agreement with the relevant foreign competent authority. An advance pricing agreement may be of a bilateral or multilateral nature.
The transfer pricing rules will apply with effect from January 1, 2024.
The Australian government is expanding its tax treaty network to provide improved certainty to taxpayers and guard against tax avoidance practices.
New negotiations are planned with Bulgaria, Colombia, Croatia, Cyprus, Estonia, Latvia, and Lithuania. These countries add to the current program which includes Portugal, Slovenia, Greece, and Luxembourg.
The current program also includes Iceland which signed a tax treaty with Australia in October this year.
Global profit shifting continues to increase despite major policy initiatives from the OECD and corporate tax reform in the United States, a new paper finds.
The paper – published by the United Nations University World Institute for Development Economics Research (UNU-WIDER) – constructs a time series of global profit shifting covering the 2015–19 period, during which major international efforts were implemented to curb profit shifting.
The paper finds that, in 2019 – four years into the implementation of the BEPS process and two years after the Tax Cuts and Jobs Act – there was no discernible decline in global profit shifting or in profit shifting by US multinationals (which according to our estimates account for about half of global profit shifting) relative to 2015.
“Of course, it is possible that absent BEPS and the Tax Cuts and Jobs Act profit shifting would have kept increasing; we do not argue these initiatives had no effect. However, their effect seems, so far, to have been insufficient to lead to a reduction in the global amount of profit shifted offshore,” the paper notes.
The Court of Justice of the European Commission annuls the European Commission’s 2015 finding that Luxembourg granted selective tax advantages to Fiat through a transfer pricing ruling, in breach of EU state aid rules.
According to the Court of Justice, the General Court committed an error of law by failing to take account of the requirement arising from the case-law, according to which, “in order to determine whether a tax measure has conferred a selective advantage on an undertaking, it is for the Commission to carry out a comparison with the tax system normally applicable in the Member State concerned, following an objective examination of the content, interaction and concrete effects of the rules applicable under the national law of that State.”
“The General Court was wrong to endorse the approach consisting in applying an arm’s length principle different from that defined by Luxembourg law, confining itself to identifying the abstract expression of that principle in the objective pursued by the general corporate income tax in Luxembourg and to examining the tax ruling at issue without taking into account the way in which the said principle has actually been incorporated into that law with regard to integrated companies in particular,” the Court said.
Large corporations paid over AUD 68 billion in income tax in 2020-21, according to a report released by the Australian Taxation Office (ATO).
ATO’s eighth annual report on corporate tax transparency reveals the amount of tax paid by large corporations in 2020–21 is the highest since reporting started.
ATO Deputy Commissioner Rebecca Saint said despite the pandemic, Australia’s large corporate taxpayers generally performed well in 2020–21. “This year’s report represents 2,468 corporate entities, who paid a combined AUD 68.6 billion in income tax, AUD 11.4 billion or 19.8 percent more than the previous year and the highest since reporting began.”
EU finance ministers, on November 8, agreed on a revised code of conduct for business taxation to identify and curb harmful tax measures of member states.
The revised code of conduct introduces in particular the concept of tax features of general application. Whereas previously only preferential measures (such as special regimes or exemptions from the general taxation system) were examined, under the new rules the scope will also include tax features of general application. These will be regarded as harmful if they lead to double non-taxation or the double or multiple use of tax benefits.
The revised code of conduct further clarifies the review process in the code of conduct group, which is responsible for the administration of the code.
The UK government has updated the country’s transfer pricing legislation to add a reference to the latest OECD Transfer Pricing Guidelines.
The Taxation (International and Other Provisions) Act, 2010 Transfer Pricing Guidelines Designation Order 2022, amends a reference to “transfer pricing guidelines” in section 164(1) of TIOPA to point to the most recent revisions to the OECD’s Transfer Pricing Guidelines.
The update comes into effect for accounting periods beginning on or after January 1, 2023, for corporation tax purposes.
Ranking Members of the United States’ Congressional committees have written to the US Treasury and the State Department to withdraw its termination of the long-standing tax treaty with Hungary.
The November 3 letter states that Treasury’s decision to unilaterally withdraw from a longstanding US tax treaty without any meaningful Congressional consultation is “particularly alarming.”
The letter states: “The Joe Biden Administration must view the actions of countries like Russia and Belarus as more offensive than a country’s mere opposition to a global tax agreement that tax administrations and experts have openly questioned and criticized. The Administration’s inconsistent treatment of our current treaty partners further highlights the flaws in Treasury’s stated justification.”
“In its negotiations of the OECD global tax agreement, this Administration has repeatedly overstepped its bounds without appropriate Congressional consultation as part of its ‘at all costs’ approach. However, US tax treaties should not be used as a unilateral, retaliatory tool by an Administration to advance its domestic agenda,” it continues.
The European Commission has extended the scope of its ongoing in-depth inquiry into Gibraltar's corporate tax regime to reassess the compatibility with State aid rules of a 2012 tax ruling granted to MJN Holdings Gibraltar Limited.
In December 2018, the Commission found that Gibraltar's corporate tax exemption regime for interest and royalties, as well as five tax rulings were illegal under EU State aid rules. In April 2022, the General Court partially annulled the Commission's decision. In particular, the Court found that the 2014 Commission's decision opening proceedings was not sufficiently precise as to the measure in favour of MJN GibCo. At the same time, the Court confirmed the Commission's decision on the tax exemption regime.
Following the partial annulment, the Commission has decided to extend the scope of its original investigation to specify further the measure in favour of MJN GibCo, in line with the Court's indications, and reassess the information submitted by the UK in relation to MJN GibCo 2012 tax ruling.
The Hong Kong government is mulling changes to combat cross-border tax avoidance arising from double non-taxation.
The Inland Revenue (Amendment) (Taxation on Specified Foreign-sourced Income) Bill, 2022 will minimize the tax compliance burden for corporations, mitigate possible double taxation, enhance tax certainty, and maintain Hong Kong’s tax competitiveness.
To mitigate possible double taxation, a range of enhancement and mitigation measures would be introduced. In addition, to minimize the compliance burden and enhance tax certainty, a business-friendly four-pronged approach will be taken.