On September 22, 2020, the OECD announced that Albania, Bosnia and Herzegovina, and Costa Rica have deposited their instruments of ratification for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting.
These latest ratifications bring to 52 the number of jurisdictions that have already deposited their acceptance or ratification instrument. The Convention will become effective on January 1, 2021, for over 500 treaties concluded among the 52 jurisdictions, with an additional 1200 treaties to become effectively modified once the MLI will have been ratified by all Signatories.
More countries are expected to deposit their instruments of ratification before September 30 in order for the MLI to start to take effect as of January 1, 2021.
On September 16, 2020, the UK Government issued a Policy Paper setting out the interest rates for over and under payments of Digital Services Tax (DST) liabilities.
The interest rate applicable to the payment of a DST liability paid before its required due date will be the reference rate less 0.25%, or 0.5% if greater.
The interest rate applicable to the repayment of a DST liability that is overpaid on or after its required due date will be the reference rate less 1%, or 0.5% if greater.
The interest rate applicable when there is an underpayment of the DST liability will be the reference rate plus 2.5%.
The changes would come into force from October 14, 2020.
See Policy Paper
On September 15, 2020, the Dutch Government issued the 2021 Tax Plan, which includes key corporate tax measures.
The previously announced reduction of the high corporation tax rate will be scrapped; the rate will remain 25%.
The reduction of the low corporation tax rate from 16.5% to 15% will go ahead as planned. In addition, more SMEs will pay this lower rate in the years ahead. From 2021, the low rate will apply to profits of up to €245,000 instead of €200,000. In 2022 this limit will be raised further to €395,000.
The scope for companies to offset losses will be reduced as of 2021, generating €555 million on a structural basis. This means that businesses will pay a more constant amount of corporation tax, and that fewer businesses will pay no tax at all in a particular year.
See 2021 Tax Plan
The Platform for Collaboration on Tax (PCT) – a joint initiative of the IMF, OECD, UN and World Bank – has extended the deadline for the public consultation on its draft Toolkit on Tax Treaty Negotiations.
In June 2020, the PCT invited feedback from the public on a draft toolkit designed to help developing countries build capacity in tax treaty negotiations. Comments were specifically invited on:
The public consultation on the Toolkit on Tax Treaty Negotiations is now accepting submissions until September 24, 2020.
On September 8, 2020, Cyprus and Russia signed a protocol to amend the Cyprus-Russia tax treaty.
The protocol increases the withholding tax on dividends and interest income to 15%, while excluding from the said withholding tax income on interest and dividends certain regulated entities, such as pension funds and insurance companies, as well as listed entities with specific characteristics.
Additionally, exemption from the said withholding tax applies for interest payments from corporate bonds, government bonds, and Eurobonds.
On September 8, 2020, the Inland Revenue Authority of Singapore published guidance on transfer pricing in view of the COVID-19 pandemic.
The guidance is published in the form of frequently asked questions. Following questions are answered:
Governments have taken unprecedented fiscal action in response to the COVID-19 crisis, but countries will need to support economic recovery in the face of significantly increasing fiscal challenges, according a new OECD report.
The Tax Policy Reforms 2020 Report - issued on September 3 - describes the latest tax reforms across OECD countries, as well as in Argentina, China, Indonesia and South Africa. The report identifies major tax policy trends adopted before the COVID-19 crisis and takes stock of the tax and broader fiscal measures introduced by countries in response to the pandemic, from its outbreak to June 2020.
The report shows that while the size of fiscal packages in response to the COVID-19 crisis has varied across countries, most have been significant, and many countries have taken unprecedented action. It also provides an overview of the reforms introduced before the COVID-19 crisis.
See Tax Policy Reforms 2020 Report
On September 1, 2020, the US Internal Revenue Service issued final regulations providing additional guidance on the base erosion and anti-abuse tax (BEAT).
To limit profit-shifting, the Tax Cuts and Jobs Act added a new tax, the BEAT. The BEAT focuses on large US corporations that make deductible payments to related foreign parties.
The final regulations provide detailed guidance regarding how to compute certain BEAT calculations for groups of related taxpayers. The final regulations also contain rules permitting taxpayers to waive deductions for purposes of the BEAT, and additional guidance regarding partnerships and anti-abuse rules.
See Final Regulations
On August 26, 2020, the Swiss Federal Council adopted the dispatches on a new tax treaty with Bahrain and on the protocol of amendment to the tax treaty with Kuwait.
The treaty with Bahrain contains an administrative assistance provision in accordance with the international standard concerning the exchange of information upon request and implements the minimum standards in accordance with the OECD’s base erosion and profit shifting project.
The protocol of amendment to the tax treaty with Kuwait enhances the dispute resolution mechanism by means of an arbitration clause and contains substantial components of the minimum standards for double taxation agreements.
On August 26, 2020, South Africa’s Deputy Minister of Finance, David Masondo, participated at the 4th African Tax Administration Forum High-level Tax Policy Dialogue.
Masondo said that the National Treasury and SARS appeared in Parliament in June 2020 to discuss the issues within the digital economy and the implications for tax policy affecting the generation of new income tax revenue.
During these discussions, National Treasury advised Parliament that South Africa has opted not to introduce any unilateral measures to deal with direct tax treatment of the challenges of the digital economy for now. South Africa has opted to wait for multilateral consensus or solutions to be published in the final report on tax challenges arising from digitalisation which is due in 2020, he said.
The Australian Taxation Office (ATO) will write next month to certain corporate tax entities informing them that the ATO’s 2018–19 Report of entity tax information is being prepared for publication.
According to the ATO’s release issued on August 18, 2020, the published report will include the company name, Australian business number, total income, taxable income, total tax payable (based on tax returns), and any PRRT amount payable for the 2018–19 income year.
The report will also contain information on entities details for 2016–17 or 2017–18 tax returns if they were lodged or processed after September 1, 2019 and the information has not been published previously.
The ATO said that it will let entities know the details being published and provide time to respond and advise if the information is incorrect.
The tax treaty between Japan and Jamaica will enter into force on September 16, 2020, Japan’s Finance Ministry announced on August 18.
The tax treaty will generally enter into effect from January 1, 2021. The provisions concerning exchange of information and assistance in the collection of taxes will have effect from September 16, 2020.
Mutual notifications necessary for the entry into force of the tax treaty were completed on August 17.
On August 12, 2020, the US government published certain corrections to final regulations Treasury Decision 9896 that were published in the Federal Register on April 8, 2020.
The final regulations provide guidance regarding hybrid dividends and certain amounts paid or accrued pursuant to hybrid arrangements, which generally involve arrangements whereby US and foreign tax law classify a transaction or entity differently for tax purposes.
The corrections are effective on August 12, 2020.
See Correcting Amendment
On August 13, 2020, the competent authorities of the Russian Federation and Malta agreed on a draft Protocol to amend the Russia-Malta tax treaty.
The protocol seeks to increase the rate of withholding tax on dividend income and interest income up to 15%, with exceptions for a limited list of institutional investments.
The protocol will come into effect after both countries sign and ratify it.
The Maltese Government has published Regulations to extend deadlines for reporting of cross-border arrangements under the country’s DAC6 legislation.
Intermediaries and relevant taxpayers, as appropriate, shall file information on reportable cross-border arrangements by February 28, 2021 (previously August 31, 2020).
The period of thirty days for filing information as required by the EU DAC6 Directive, shall begin by January 1, 2021, (previously July 1, 2020) where a reportable cross-border arrangement is made available for implementation, or is ready for implementation, or where the first step in its implementation has been made between July 1, 2020, and December 31, 2020.
In the case of marketable arrangements, the first periodic report shall be made by the intermediary by April 30, 2021.