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.
On May 12-13, 2020, the OECD held a virtual public consultation meeting on the 2020 review of the country-by-country (CbC) reporting requirement developed under Action 13 of the base erosion and profit shifting project.
The OECD had previously sought public comments on the 2020 Review of CbC reporting. The public consultation meeting focused on the key questions identified in the consultation document and raised in the written submissions received as part of the consultation process.
The OECD has published videos of the public consultation meeting on its website.
On May 11, 2020, the US Internal Revenue Service (IRS) announced certain modifications to procedures for filing of documents when making mutual agreement procedure (MAP) and advance pricing agreement (APA) requests.
Any documents requiring the taxpayer's signature may be submitted with either an image of the taxpayer's signature (scanned or photographed) or the taxpayer's digital signature created using encryption techniques to provide proof of original and unmodified documentation. Either form of signature is acceptable.
All submissions may be filed electronically; paper copies are not required.
With regard to questions about pending and executed APAs, the tax authority is actively discussing various substantive and procedural issues with treaty partners, including such technical issues as the application of transfer pricing methods in periods of economic distress and the impacts of current economic conditions on specific industries, types of taxpayer, regions, etc.
On May 8, 2020, the European Commission decided to defer the deadlines for filing and exchanging information under the Directive on Administrative Cooperation (also known as “DAC6”).
Based on the proposed changes, member states will have three additional months to exchange information on financial accounts of which the beneficiaries are tax residents in another Member State. Similarly, member states will have three additional months to exchange information on certain cross-border tax planning arrangements.
Depending on the evolution of the Coronavirus pandemic, the Commission proposes the possibility to extend the deferral period once, for a maximum of three further months. The proposed tax measures only affect the deadlines for reporting obligations.
The beginning of application of DAC6 will remain July 1, 2020, and the reportable arrangements made during the postponement period will have to be reported by the time the deferral has terminated.
See Press Release
The governments of Liechtenstein and Ukraine have mutually decided to negotiate and enter into a tax treaty.
The decision was taken at a telephonic meeting held on May 5, 2020, between officials from both countries.
The tax treaty would need to be signed and ratified by both countries before it can take effect.
On April 28, 2020, Indonesia ratified the OECD’s Multilateral Instrument to tackle base erosion and profit shifting (BEPS).
Indonesia intends to cover 47 of its tax treaties under the BEPS MLI.
For Indonesia, the BEPS MLI will enter into force on August 1, 2020.
On April 28, 2020, the Finnish tax authority published guidance on application of the country's law on reporting of cross-border tax arrangements (commonly referred to as 'DAC6').
The guidance covers the following areas: what is a reportable arrangement; what information must be reported; and when should the report be submitted.
The tax authority noted that an electronic reporting channel will be opened in July 2020.
Further guidance will be published over the coming months.
Registration is open for the OECD’s upcoming tax webcast.
The live webcast will be held on May 4, 2020, between 14:00-15:00 (CEST).
The webcast will feature experts from the OECD’s Centre for Tax Policy and Administration who would provide the latest update on the OECD’s current work in tackling COVID-19 and describe how the OECD has adapted its programme of work on international tax matters.
The webinar will feature a 45-minute presentation, followed by a 10-15-minute Q&A session.
See Registration details
On April 19, 2020, the Puerto Rican Office of the Governor announced that Governor Wanda Vázquez Garced has signed into law a bill containing several amendments to the Puerto Rico Tax Reform passed last year.
The new law, Law 40-2020, eliminates the tax on the provision of services rendered to other businesses and designated professional services, known as B2B, on 85% of taxpayers, increasing (from USD 200,000 to USD 300,000) the business volume that will be tax exempt.
The law also eliminates the special 1.5% tax for professional and advisory services provided to the government in excess of USD 300,000.
On April 15, 2020, the US Internal Revenue Service (IRS) issued a set of frequently asked questions (FAQs) based on the IRS' observations of best practices and common mistakes in preparing transfer pricing documentation.
These FAQs and responses are illustrative in nature. The responses, and examples therein, are high-level only and should not be relied on to analyze actual transactions, the IRS said.
Following six questions are addressed:
On April 14, 2020, Irish Revenue issued a note on the revised tax treatment of royalty income under the provisions of the Ireland-Lithuania tax treaty.
Ireland’s tax treaty with Lithuania came into effect in 1999, which notes that the tax treatment of royalty income may be revised if more favorable terms are subsequently agreed by Lithuania with another OECD country.
Lithuania recently agreed such terms with Japan and those terms are now to apply to the Ireland-Lithuania tax treaty with effect from January 1, 2019.
Tax and Duty Manual Part 35-01-12 has been created to provide details.
See Part 35-01-12
On April 9, 2020, the OECD published stage 2 peer review monitoring reports of a further seven jurisdictions as part of its work on Action 14 of the base erosion and profit shifting (BEPS) project.
The reports concern the following seven jurisdictions: Austria, France, Germany, Italy, Liechtenstein, Luxembourg, and Sweden.
The reports evaluate the progress made by these seven jurisdictions in implementing any recommendations resulting from jurisdictions' stage 1 peer review reports. The stage 2 monitoring considers any developments in the period April 1, 2017 – September 30, 2018, and the mutual agreement procedure (MAP) statistics are based on years 2016 and 2017.
The results from the peer review and peer monitoring process demonstrate positive changes across all seven jurisdictions, although not all show the same level of progress, the OECD said.
According to the OECD, all jurisdictions now have a documented notification/bilateral consultation process to be applied in cases where an objection is considered as being not justified by their competent authority.
The report reveals that Austria, Germany, Italy, Luxembourg, and Sweden have added more personnel to the competent authority function, and/or made or initiated several organisational improvements with a view to handling MAP cases in a more timely, effective, and efficient manner.
The report further reveals that Austria, Germany and Sweden decreased the amount of time needed to close MAP cases, and Liechtenstein and Luxembourg met the sought-after 24-month average time frame to close MAP cases. Austria introduced legislative changes to ensure that all MAP agreements can be implemented notwithstanding domestic time limits if the treaty does not provide for it, while in five of the other six, this is already the case.
Last, Austria, Germany, Luxembourg, and Sweden have updated or clarified issues in their MAP guidance.
On April 8, 2020, the US Internal Revenue Service issued a document containing final regulations providing guidance on hybrid dividends and dual consolidated losses.
The guidance deals with 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 document contains final regulations relating to dual consolidated losses and entity classifications to prevent the same deduction from being claimed under the tax laws of both the US and a foreign jurisdiction.
Finally, the document contains final regulations regarding information reporting to facilitate the administration of certain rules in the final regulations. The final regulations affect taxpayers that would otherwise claim a deduction related to such amounts and certain shareholders of foreign corporations that pay or receive hybrid dividends.
The regulations are effective from April 8, 2020.
Poland has temporarily suspended the reporting of cross-border tax arrangements under the country’s DAC6 law.
The Government said that the deadlines for submitting the forms are suspended until June 30, 2020. The decision was taken in view of the COVID-19 pandemic.
The suspension is applicable to both domestic and cross-border arrangements.
On April 6, 2020, the Dutch Government issued guidance on the application of the OECD’s Multilateral Instrument to implement tax treaty-related base erosion and profit shifting measures.
Netherlands ratified the BEPS MLI on March 29, 2019, and the Instrument entered into force for Netherlands on July 1, 2019.
The guidance covers the following information: what is the MLI, how does the MLI work, and when does the MLI apply. It includes a table setting out the tax treaties that are affected by the MLI.