On July 20, 2020, Hungary’s tax authority issued guidance on the country’s law requiring intermediaries and taxpayers to report cross-border arrangements.
The requirement was introduced in July last year to implement the EU Directive on reporting of cross-border tax arrangements (DAC6 Directive).
The guidance provides an overview of the reporting legislation, entities required to report the arrangements, the reporting timelines, and penalties for non-reporting. Information on how arrangements need to be reported is also provided.
On July 27, 2020, the OECD published the ninth round of stage 1 peer review reports as part of its work on base erosion and profit shifting (BEPS) Action 14.
The reports of following jurisdictions were published: Andorra, Bahamas, Bermuda, British Virgin Islands, Cayman Islands, Faroe Islands, Macau (China), Morocco, and Tunisia.
The reports contain around 185 targeted recommendations that will be followed up in stage 2 of the peer review process.
On July 30, 2020, the OECD Secretariat and Receita Federal do Brasil have launched a survey to seek public input to inform the work related to the development of safe harbors as well as other simplification measures and measures that can contribute to enhanced tax certainty.
The survey was launched as part of the implementation phase of a joint transfer pricing project between the OECD and Brazil.
The survey document contains an open invitation to stakeholders to contribute to the project by providing their specific experience or comments on elements relevant to the development of safe-harbor regimes and other measures contributing to tax certainty in Brazil.
On July 21, 2020, the UK tax authority issued a policy paper identifying two technical amendments to the corporate interest restriction for corporation tax.
The corporate interest restriction restricts the ability of large businesses to reduce their taxable profits through excessive UK interest expense. It encourages alignment of the location of taxable profits with the location of economic activity and is consistent with the UK’s more territorial approach to corporation tax.
Legislation will be introduced in Finance Bill, 2020-21 to clarify the way special provisions in the corporate interest restriction rules apply in the context of a Real Estate Investment Trust, to take into account that UK property businesses of non-resident companies are now within the charge to corporation tax rather than income tax.
The amendment will also make sure that no penalties arise for the late filing of an interest restriction return if there is a reasonable excuse for the failure, bringing the administrative rules in line with those for corporation tax self-assessment.
See Policy Paper
On July 15, 2020, the Hong Kong Inland Revenue Department issued revised guidance notes on advance pricing agreements (APAs).
The Departmental Interpretation And Practice Notes No. 48 (Revised) provides an overview of the APA regime. It discusses the APA process, including the steps involved, analysis and evaluation, collateral issues.
Guidance is also provided on monitoring and compliance, refusal and withdrawal of APA applications, and prospective application of APAs and roll back provisions.
These notes replace those issued in March 2012.
On July 1, 2020, the Tanzania Revenue Authority published the Transfer Pricing Guidelines 2020.
The objective of these Guidelines is to provide information about the procedures to be followed in the determination of arm’s length prices and provide consistency in administration of tax laws.
Examples used in the Guidelines are for demonstrative purposes only. Thus, in dealing with actual cases, the facts and circumstances of each case must be considered before deciding on the applicability of any of the methods recommended in the Guidelines.
On July 8, 2020, the Irish Revenue issued guidance on the operation of the country’s anti-hybrid rules, which were introduced into Part 35C TCA 1997 by Finance Act 2019.
The guidance sets out information relating to what is meant by a mismatch outcome, being a double deduction mismatch outcome or a deduction without inclusion mismatch outcome, and the specific situations that give rise to a hybrid mismatch outcome.
Guidance is also provided on the meaning of the term “corresponding amount” and how to test whether a corresponding amount has been included for the purposes of the anti-hybrid rules in various scenarios.
Finally, the guidance provides information on how the anti-hybrid rules interact with Ireland’s worldwide system of taxation and how the rules interact with an effective worldwide system of taxation such as the US check-the-box system of taxation.
On July 14, 2020, the European Commission recommended member states to not grant financial support to companies with links to countries that are on the EU's list of non-cooperative tax jurisdictions.
The aim of the recommendation is to provide guidance to member states on how to set conditions to financial support that prevent the misuse of public funds and to strengthen safeguards against tax abuse throughout the EU, in line with EU laws.
Should member states decide to introduce such provisions in their national legislation, the Commission suggested a number of conditions on which they should make the financial support contingent. The EU list of non-cooperative tax jurisdictions is the best basis to apply such restrictions, as it will enable all member states to act consistently and will avoid individual measures that may violate EU law, the Commission noted.
See Press Release
On July 8, 2020, the OECD released data providing information on the global tax and economic activities of nearly 4,000 multinational enterprise (MNE) groups headquartered in 26 jurisdictions and operating across more than 100 jurisdictions worldwide.
The data is a major output based on the country-by-country reporting requirements for MNEs under the base erosion and profit shifting project.
The dataset contains a vast array of aggregated data on the global tax and economic activities of MNEs, including profit before income tax, income tax paid (on a cash basis), current year income tax accrued, unrelated and related party revenues, number of employees, tangible assets, and the main business activity (or activities) of MNEs.
The statistics suggest a number of preliminary insights:
On July 7, 2020, Oman deposited its instrument of ratification for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (Multilateral Convention or MLI) with the OECD’s Secretary-General, Angel Gurría.
For Oman, the MLI will enter into force on November 1, 2020.
With 94 jurisdictions currently covered by the MLI, ratification by Oman now brings to 49 the number of jurisdictions which have ratified, accepted or approved it. The text of the Multilateral Convention, the explanatory statement, background information, database, and positions of each signatory are available at http://oe.cd/mli
Canada’s Alberta has dropped the corporate tax rate to 8% with effect from July 1, 2020.
Alberta’s general corporate income tax rate is now at least 30% lower than any other provincial rate. The government said that it is sending a strong message that it is open for business by dropping the rate a year and a half ahead of schedule.
Travis Toews, President of Treasury Board and Minister of Finance, said: “As Alberta moves towards recovery, we remain committed to making our province one of the most tax-competitive jurisdictions in North America and the top business destination in the country. The Job Creation Tax Cut will dovetail with the new Innovation Employment Grant to support a wide range of Alberta job creators.”
On June 29, 2020, the Platform for Collaboration on Tax released for public comments a draft toolkit designed to help developing countries build capacity in tax treaty negotiations. The Platform is a joint initiative of the International Monetary Fund, the OECD, the United Nations, and the World Bank Group.
The draft toolkit is a joint effort to provide capacity-building support to developing countries on tax treaty negotiations, building on existing guidance, particularly from the UN Manual for negotiation of tax treaties. The toolkit describes the steps involved in tax treaty negotiations such as how to decide whether a comprehensive tax treaty is necessary, how to prepare for and conduct negotiations, and what follow-up measures to take after negotiations.
The toolkit collates links to publicly available resources that treaty negotiators will find useful, making them easily accessible for treaty teams.
Comments must be received by September 10, 2020.
See Draft Toolkit
The Irish Revenue has provided a six-month extension in respect of the DAC6 reporting requirement.
The country’s DAC6 reporting requirement was supposed to come into operation on July 1, 2020. However, the Revenue has extended the reporting timelines in view of COVID-19 pandemic.
The 30-day time period for the reporting information will now commence on January 1, 2021.
For any reportable cross-border arrangements made between July 1, 2020, and December 31, 2020, the 30-day reporting period also commences on January 1, 2021. Reportable cross-border arrangements, the first step of which was implemented between June 25, 2018, and June 30, 2020, must be reported by February 28, 2021.
The new reporting deadline for periodic reporting on marketable arrangements is April 30, 2021.
The DAC6 filing portal will open on January 1, 2021.
On June 18, 2020, the Swedish tax authority published guidance on reporting of cross-border arrangements under the country’s DAC6 law.
The guidance includes information on the purpose of reporting, the kinds of arrangements that need to be reported, who should report the information, the information that need to be reported, and the reporting timelines.
The reporting requirement applies from July 1, 2020. However, the government is considering whether to extend the timelines in view of COVID-19.
On June 18, 2020, OECD Secretary-General Angel Gurría provided a statement on the ongoing negotiations to address the tax challenges of the digitization of the economy.
Gurría said: “Addressing the tax challenges arising from the digitization of the economy is long overdue. All members of the Inclusive Framework should remain engaged in the negotiation towards the goal of reaching a global solution by year end, drawing on all the technical work that has been done during the last three years, including throughout the COVID-19 crisis.”
Gurría said that in the absence of a multilateral solution, more countries will take unilateral measures and those that have them already may no longer continue to hold them back. This, in turn, would trigger tax disputes and, inevitably, heightened trade tensions, he said.
He added: “A trade war, especially at this point in time, where the world economy is going through a historical downturn, would hurt the economy, jobs, and confidence even further. A multilateral solution based on the work of the 137 members of the Inclusive Framework at the OECD is clearly the best way forward.”