On January 14, 2021, the European Commission published a roadmap to address the issue of fair taxation of the digital economy.
According to the roadmap, the initiative will be designed in a way that is consistent with the Digital Services Act package and the Commission’s digital strategy to ensuring a fair and competitive digital economy. The initiative will be compatible with the international agreement to be reached in the OECD, as well as broader international obligations.
The roadmap notes that the EU Commission will identify additional policy options, such as: a corporate income tax top-up to be applied to all companies conducting certain digital activities in the EU; a tax on revenues created by certain digital activities conducted in the EU; and a tax on digital transactions conducted business-to-business in the EU.
Comments must be received by February 11, 2021.
On January 14, 2021, the US Trade Representative (USTR) issued findings in Section 301 investigations of Digital Service Taxes adopted by Austria, Spain, and the UK.
The USTR concluded that each of the DSTs discriminates against US companies, is inconsistent with prevailing principles of international taxation, and burden or restricts US commerce.
The findings on each of the DSTs are supported by comprehensive reports, which have been published on USTR’s website.
On January 13, 2021, the Australian tax authority published Law Companion Ruling 2021/1, providing the Commissioner's view of particular aspects of the law in relation to the hybrid mismatch targeted integrity rule.
The hybrid mismatch targeted integrity rule – contained in Subdivision 832-J of the Income Tax Assessment Act, 1997 – was legislated as part of the package of measures making up Australia's hybrid mismatch rules.
This Ruling also covers the amendments to the targeted integrity rule (and other provisions impacted by the rule's hypothetical operation), contained in Parts 1 and 3 of Schedule 1 to the Treasury Laws Amendment (2020 Measures No.2) Act, 2020.
The Ruling is effective from January 1, 2019.
See Law Companion Ruling 2021/1
On January 13, 2021, the OECD published a list of comments received from various stakeholders on the 2020 review of Action 14 of the base erosion and profit shifting Action Plan.
In particular, the consultation sought stakeholders’ input on experiences with, and views on, the status of dispute resolution and suggestions for improvements, including experiences with mutual agreement procedures in those jurisdictions that obtained a deferral.
Additional comments may still be submitted by January 25. The public consultation meeting will be held virtually on February 1, 2021.
The Cypriot tax authority has issued two notices setting out guidance on the requirement for entities to report certain cross-border arrangements.
Cyprus is yet to transpose the EU DAC6 Directive into its domestic law. However, the notice states that entities may voluntarily file information until legislation is given effect to, which is likely to happen later this month. Filing must be done electronically via the government’s Ariadni portal using an XML form.
The guidance briefly covers topics such as hallmarks, concept of intermediaries and relevant taxpayers and the reporting deadlines.
On December 21, 2020, Barbados deposited its instrument of ratification for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting with the OECD.
For Barbados, the MLI will enter into force on April 1, 2021.
The BEPS MLI now covers over 1,700 bilateral tax treaties. The Multilateral Convention became effective on January 1, 2021, for over 600 treaties concluded among the 60 jurisdictions.
On January 4, 2020, the Maltese tax authority issued guidance on the DAC6 reporting requirement.
The guidance includes information on reporting entities, reportable arrangements, the different categories of hallmarks, information to be submitted and how, and penalties.
The guidance provides clarifications on the concepts of the main benefit test and tax advantage.
DAC6 was implemented by Legal Notice L.N. 342 of 2019 with effect from July 2020.
The tax treaty between Hong Kong and Serbia came into force on December 30, 2020, after the completion of the relevant ratification procedures.
The tax treaty was signed in August 2020. The treaty provides for reduced withholding tax rates on certain kinds of payments.
The tax treaty applies for Serbia from January 1, 2021, and for Hong Kong from April 1, 2021.
On December 28, 2020, the Italian Revenue Agency published a draft Circular on DAC6, providing key information on the application of the reporting requirement.
The Circular provides information on hallmarks, reporting triggers, entities required to report, and penalties for non-compliance.
Public input on the draft Circular is sought until January 15.
See Draft Circular
Irish Revenue has updated The Tax and Duty Manual Part 33-03-03, which provides guidance on the country’s DAC6 legislation.
The Tax and Duty Manual has been updated in a number of respects and, where those updates are material, they are set out in Appendix V.
Under the EU mandatory disclosure regime, intermediaries and, in certain circumstances, taxpayers, are required to disclose information regarding “reportable cross-border arrangements” to the tax authorities of EU Member States, including Revenue.
On December 17, 2020, the Greek Independent Authority for Public Revenue published a revised list of preferential tax regimes for the 2019 tax year.
For the 2019 tax year, the list includes: Albania, Andorra, Anguilla, Bahamas, Bahrain, Belize, Bermuda, Bonaire, Bosnia-Herzegovina, British Virgin Islands, Bulgaria, Cayman Islands, Cyprus, Gibraltar, Guernsey, Hungary, Ireland, Isle of Man, Jersey, Jordan, Kosovo, Liechtenstein, Macau, Maldives, Marshall Islands, Moldova, Monaco, Montenegro, Montserrat, Nauru, North Macedonia, Paraguay, Qatar, Saudi Arabia, Sri Lanka, St. Eustatius, Turks and Caicos Islands, the UAE, Uzbekistan, and Vanuatu.
Oman and Seychelles have both been removed from the list as it stood for 2018.
On December 18, 2020, the OECD published detailed guidance on the transfer pricing implications of the COVID-19 pandemic.
The guidance discusses the practical application of the arm’s length principle in the following four priority issues identified in consultation with Business at the OECD: comparability analysis; losses and the allocation of COVID-19 specific costs; government assistance programmes; and advance pricing agreements (APAs).
The guidance represents the consensus view of the 137 members of the Inclusive Framework on BEPS regarding the application of the arm’s length principle and the OECD Transfer Pricing Guidelines to issues that may arise or be exacerbated in the context of the COVID-19 pandemic.
Transparency on tax rulings is now a fully-entrenched part of the international tax framework, with 20,000 tax rulings having been identified and 36,000 exchanges between jurisdictions having taken place, a new report reveals.
According to the 2019 Peer Review Reports on the Exchange of Information on Tax Rulings released on December 15, 81 jurisdictions are now fully in line with the BEPS Action 5 minimum standard, with the remaining 43 jurisdictions receiving one or more recommendations to improve their legal or operational framework to identify and exchange the tax rulings.
As the delivery of the BEPS project has reached its five-year mark this year, the Inclusive Framework is now working to ensure that the progress made on ensuring transparency in relation to the issuance of tax rulings is maintained towards the future, both through a review of the overall effectiveness of the Standard and the development of a renewed peer review process for the years 2021-2025.
The Inland Revenue Authority of Singapore has published a short note on The International Compliance Assurance Programme (ICAP).
IRAS is participating in ICAP from 2021. An MNE may indicate an interest in participating in ICAP to the tax administration in the jurisdiction of its ultimate parent entity (the UPE tax administration) or may be approached by its UPE tax administration to discuss its possible participation in the programme.
The MNE’s suitability for ICAP will be considered on a case-by-case basis. The MNE may propose for participating tax administrations it wishes to involve in its ICAP risk assessment, which will be subject to the participating tax administrations’ agreement.
The International Compliance Assurance Programme (ICAP) is a voluntary risk assessment and assurance programme to facilitate co-operative multilateral engagements between multinational enterprises (MNEs) and tax administrations.
The Netherlands disagrees with the Russian proposal to amend the tax treaty, according to a news published by TASS, Russian News Agency.
"According to the Netherlands, the Russian proposal to amend the tax treaty takes too limited account of real economic activities. This proposal therefore has negative consequences for both the Dutch and Russian businesses," TASS wrote quoting Remco Raus, the press officer of the Dutch Finance Ministry.
According to Raus, the Dutch side has made "constructive proposals to preserve the tax treaty for real economic activities whilst preventing access to activities that do not contribute to the economy in line with the Dutch policy to combat tax avoidance." He added that discussions on the revision of the tax treaty are still ongoing, TASS wrote.