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:
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.”
On June 19, 2020, the Dutch Government announced that it has decided to provide COVID-19 support to those companies that do not engage in undesirable tax avoidance practices.
The government said that companies engaged in undesirable tax planning can apply for individual support only if they satisfy two tax-related conditions concerning business location and transactions.
First, companies must not be based in a low-tax jurisdiction, i.e. countries with a corporate tax rate of under 9% and countries on the EU blacklist. And secondly, companies must not make payments to a country where the tax rate is too low. Additionally, the Dutch establishments of the company seeking assistance must not pay interest or royalties to group entities in low-tax countries or countries on the EU blacklist.
The business location condition also applies to subsidiaries and shareholdings and to the direct shareholders of the company seeking assistance. This condition only applies to shareholders owning over 10% of the company’s shares. It does not apply where a company carries out real operations at subsidiaries in low-tax countries, the government said.
The government said that since a company that gets into difficulties as a result of the coronavirus crisis may need help fast, it can still obtain support if it agrees to satisfy the conditions within 12 months.
The Dutch government is planning to introduce a new withholding tax on dividend flows to low-tax jurisdictions in 2024.
The new tax will come on top of the withholding tax to be imposed on interest and royalties from 2021. The new tax will enable the Netherlands to tax dividend payments to countries that levy little or no tax and will also help curb the use of the Netherlands as a conduit country. The measure will apply to financial flows to countries with a corporate tax rate of under 9% and to countries on the EU blacklist, even if the Netherlands has a tax treaty with them.
State Secretary for Finance, Hans Vijlbrief, explained: “This additional withholding tax represents another major step in our fight against tax avoidance. Financial flows channeled from or through the Netherlands to another country where they are not or not sufficiently taxed, will soon no longer go untaxed. It’s now vital to make even better international agreements to prevent other countries being used for tax avoidance purposes.”
On June 11, 2020, the US Department of Treasury released the third quarter update to the 2019-2020 Priority Guidance Plan.
The Priority Guidance Plan contains guidance projects that the Treasury intends to complete during the twelve-month period from July 1, 2019, through June 30, 2020.
The third quarter update to the 2019-2020 plan reflects 25 additional projects which have been published (or released) during the period from January 1, 2020 through March 31, 2020. The Treasury may further update the plan during the year to reflect additional items that have become priorities and guidance that we have published during the plan year.
See Update to 2019-2020 Priority Guidance Plan
On June 4, 2020, the Platform for Collaboration on Tax (PCT) released a Toolkit on the Taxation of Offshore Indirect Transfers.
The toolkit provides guidance on the design and implementation issues when one country seeks to tax gains on the sale of interests in an entity owning assets located in that country by an entity which is a tax resident in another country.
This toolkit addresses a concern of significance to developing countries, mostly but not exclusively natural resource rich countries – primarily from the perspective of the country where the underlying assets are located.
The PCT is a joint initiative of the International Monetary Fund, the Organisation for Economic Cooperation and Development, the United Nations, and the World Bank Group.
See Toolkit on the Taxation of Offshore Indirect Transfers
On June 2, 2020, the Finnish tax authority published guidance on the most common provisions contained in a tax treaty.
The article-by-article review of a tax treaty in the guidance follows the order of the OECD Model Tax Convention. The guidance addresses the treaty provisions at a very general level.
The guidance contains a brief overview of tax treaties in general, relationship between treaty law and domestic law, impact of the OECD’s Multilateral Instrument on BEPS, and the Vienna Convention of the Law on Treaties, among others.
On June 3, 2020, Liechtenstein and the Netherlands signed a new tax treaty.
The tax treaty is the first of its kind between the two countries. The treaty provides for a low withholding tax rate for dividends, interest, and royalties.
The treaty incorporates some of the OECD’s recommendations published as part of the base erosion and profit shifting project. It also includes an arbitration clause as part of the mutual agreement procedure to resolve treaty disputes.
Further details would be provided when available.
On June 2, 2020, the US Trade Representative announced that it will launch an investigation into digital services tax rules adopted or being considered by ten trading partners.
The investigations concern the following ten trading partners: Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey, and the United Kingdom.
The investigation would be conducted under Section 301 of Trade Act, 1974, which gives the US Trade Representative broad authority to investigate and respond to a foreign country's action that may be unfair or discriminatory and negatively affect US Commerce.
The US Trade Representative has invited comments on any issue covered by the investigations. Comments must be received by July 15.
On May 29, 2020, the South African Revenue Service published Interpretation Note 87 (Issue 3), which sets out guidance and clarity on the interpretation and application of the tax law concerning headquarter companies.
The Note also briefly discusses other provisions of the Income Tax Act that provide special tax relief for headquarter companies, as well as the specific anti-avoidance rules that are designed to prevent misuse or abuse of those provisions.
The Note deals with the following topics in the context of headquarter companies: controlled foreign companies, transfer pricing, ring-fencing of interest and royalties, withholding tax, and corporate restructuring rules, among other things.
See Interpretation Note 8
On May 13, 2020, Czech Republic and Korea deposited their instrument of ratification for the Multilateral Convention to implement tax treaty-related measures to prevent base erosion and profit shifting (BEPS) with the OECD.
The move underlines their strong commitment to prevent the abuse of tax treaties and BEPS practices by multinational enterprises.
For the Czech Republic and Korea, the MLI will enter into force on September 1, 2020.