On July 5, 2021, the Australian Government launched a public consultation on a new patent box regime.
On May 11, 2021, the Australian Government announced that it will introduce a patent box for eligible corporate income associated with new patents in the medical and biotechnology sectors. The patent box will apply to companies for income years commencing on or after July 1, 2022.
The aim of the Government’s policy is to encourage companies to base their medical and biotechnology research and development (R&D) operations, and commercialize innovation, in Australia and to retain associated patent profits in Australia. The objective of this discussion paper is to inform the Government’s consideration of the detailed design of the patent box announced in the 2021‑22 Budget.
Comments must be received by August 16, 2021.
See Consultation Document
On July 1, 2021, the OECD announced that 130 countries and jurisdictions have joined a new two-pillar plan to reform international taxation rules and ensure that multinational enterprises pay a fair share of tax wherever they operate.
The two-pillar package aims to ensure that large multinational enterprises (MNEs) pay tax where they operate and earn profits, while adding much-needed certainty and stability to the international tax system.
Pillar One will ensure a fairer distribution of profits and taxing rights among countries with respect to the largest MNEs, including digital companies. It would re-allocate some taxing rights over MNEs from their home countries to the markets where they have business activities and earn profits, regardless of whether firms have a physical presence there.
Pillar Two seeks to put a floor on competition over corporate income tax, through the introduction of a global minimum corporate tax rate that countries can use to protect their tax bases.
Participants in the negotiation have set an ambitious timeline for conclusion of the negotiations. This includes an October 2021 deadline for finalizing the remaining technical work on the two-pillar approach, as well as a plan for effective implementation in 2023.
The provisions in the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act eliminating the preferential tax rates given to regional operating headquarters (ROHQs) of multinational corporations (MNCs) has cleared the way to the Philippines’ removal by January 2022 from an international list of “harmful” tax regimes, the Philippine Department of Finance (DOF) has said.
Through the initiative of the DOF led by Undersecretary Antonette Tionko, the OECD’s Forum on Harmful Tax Practices (FHTP) granted the Philippines’ appeal to assess its ROHQ regime as “potentially harmful but not actually harmful” until December 3, 2021, and then have the country’s ROHQ regime status declared as “abolished” by January 1, 2022.
The FHTP considers as “harmful tax features” the special tax rates given to ROHQs because these gave undue tax advantages to foreign taxpayers and discriminates against local taxpayers; and recipients were not required to show “adequate substance for the activities carried out.”
Tionko said in her report to Finance Secretary Carlos Dominguez III that the FHTP had initially recommended that the Philippines’ ROHQ regime be assessed as “harmful” until December 31 this year, but the DOF’s Revenue Operations Group successfully appealed that this be changed to “potentially harmful but not actually harmful” owing to the enactment of an existing law—CREATE—which removes the tax perks given to ROHQs beginning January 1, 2022.
From the previous preferential rate of 10 percent, ROHQs will be taxed the general corporate income tax rate as those imposed on other companies by January 1, 2022 under CREATE.
Taiwan's Ministry of Finance has released a Decree regarding principles of tax collection authorities concluding cross-border bilateral or multilateral advance pricing arrangements under the Mutual Agreement Procedures of the applicable Income Tax Agreements.
The Ministry of Finance explained that, all of its 33 effective income tax agreements include an Article of "Mutual Agreement Procedures"(hereinafter referred to as "MAP"). Multinational enterprise (MNE) groups apply for BAPAs based on the MAP provisions in order to avoid double taxation arising from the transfer pricing adjustments made respectively by the tax collection authorities of the contracting parties on the income of the controlled transactions.
The Ministry of Finance further explained that, considering different countries with their own domestic transfer pricing laws and regulations to adjust the results of the controlled transactions not within the arm's length range differently, and different industries bearing different levels of risk towards business cycles or operation cycles, the Ministry of Finance released this Decree to grant the tax collection authorities flexibility to negotiate with the competent authorities of the treaty partners.
On June 23, 2021, the exchange of diplomatic notes between the Government of Japan and the Government of Uruguay for the entry into force of a tax treaty between both countries took place.
The tax treaty, accordingly, will enter into force on July 23, 2021.
The tax treaty will generally have effect from January 1, 2022.
On June 22, 2021, OECD published international exchange framework and optional module for Model Reporting Rules for Digital Platforms.
The Model Rules for Reporting by Platform Operators with respect to Sellers in the Sharing and Gig Economy were developed in light of the rapid growth of the digital economy and in response to calls for a global reporting framework in respect of activities being facilitated by such platforms, in particular in the sharing and gig economy.
Activities facilitated by platforms may not always be visible to tax authorities or self-reported by taxpayers. At the same time, the platform economy also permits increased access to information by tax administrations, as it brings activities previously carried out in the informal cash economy onto digital platforms.
See Model Reporting Rules
On June 5, 2021, the Group of Seven (G7) Finance Ministers agreed to back an historic international agreement on global tax reform, which would ensure that large multinational enterprises (MNEs) pay their fair share of tax.
The G7 agreed the principles of an ambitious two Pillar global solution to tackle the tax challenges arising from an increasingly globalized and digital global economy.
Under Pillar One, the largest and most profitable multinationals will be required to pay tax in the countries where they operate – and not just where they have their headquarters. The rules would apply to global firms with at least a 10 percent profit margin – and would see 20 percent of any profit above the 10 percent margin reallocated and then subjected to tax in the countries they operate.
Under Pillar Two, the G7 also agreed to the principle of at least 15 percent global minimum corporation tax operated on a country-by-country basis, creating a more level playing field for UK firms and cracking down on tax avoidance.
Chancellor Rishi Sunak said: “These seismic tax reforms are something the UK has been pushing for and a huge prize for the British taxpayer – creating a fairer tax system fit for the 21st century. This is a truly historic agreement and I’m proud the G7 has shown collective leadership at this crucial time in our global economic recovery.”
Cyprus Tax Department will not impose penalty for overdue submission of DAC6 information that will be submitted until the September 30, 2021.
The penalty relief applies to:
On June 2, 2021, US Senate Finance Committee launched an investigation into AbbVie’s international tax practices.
The investigation seeks to underscore how the 2017 Republican Tax Law has allowed the company to avoid paying taxes on US prescription drug sales.
Committee Chair Ron Wyden, D-Ore. has sought information on the methods employed by AbbVie by June 16, 2021.
The US Trade Representative (USTR) has suspended tariffs on goods from six trading partners that were to be imposed in retaliation to discriminatory digital services tax introduced by these countries.
While the final determination in those digital services tax investigations is to impose additional tariffs on certain goods from these countries, the said tariffs have been suspended for up to 180 days to provide additional time to complete the ongoing multilateral negotiations on international tax at the OECD and in the G-20 process.
Ambassador Katherine Tai said: “The United States is focused on finding a multilateral solution to a range of key issues related to international tax, including our concerns with digital services tax. The United States remains committed to reaching a consensus on international tax issues through the OECD and G-20 processes. Today’s actions provide time for those negotiations to continue to make progress while maintaining the option of imposing tariffs under Section 301 if warranted in the future.”
The OECD has published comments received from stakeholders on the proposed tax changes to the commentaries on Article 9 of the OECD Model Tax Convention.
In March 2021, the OECD invited public comments on a discussion draft on the proposed changes. The changes put forward in the discussion draft are expected to be included in the next update to the OECD Model Tax Convention.
Working Party 1 will consider these comments as it finalizes its work in this area with the expectation that revised commentaries will be included in the next update of the OECD Model Convention.
On May 20, 2021, the US Department of the Treasury said that it has told the Steering Group of the OECD Inclusive Framework on BEPS that the minimum global corporate tax rate should be at least 15 percent.
The US Treasury reiterated that with the global corporate minimum tax functionally set at zero today, there has been a race to the bottom on corporate taxes, undermining the US’ and other countries' ability to raise the revenue needed to make critical investments.
The Treasury proposed that that the global minimum tax rate should be at least 15 percent. Treasury underscored that 15 percent is a floor and that discussions should continue to be ambitious and push that rate higher.
On May 20, 2021, the OECD announced that the Conference of the Parties to the BEPS MLI approved an opinion that sets out a series of guiding principles for addressing questions about the interpretation and implementation of the MLI.
The principles, discussed and approved by the Conference of the Parties to the MLI, were drawn from public international law, the design of the MLI itself, and its drafting history.
The MLI so far covers 95 jurisdictions and has been ratified by 65 jurisdictions. It is the first multilateral treaty of its kind, allowing jurisdictions to swiftly transpose results from the BEPS project into their existing tax treaties. The MLI became effective on January 1, 2021, for approximately 650 treaties concluded among the 65 jurisdictions.
See Opinion of the Conference of the Parties to the BEPS MLI
On May 21, 2021, the OECD published a case study highlighting progress made by Senegal to tackle base erosion and profit shifting, as a result of the full commitment of the political and administrative authorities to conducting tax reforms and driving change.
This series of tax and development case studies in selected countries demonstrates how governments in developing countries are addressing tax avoidance and evasion, assisted by the tools and capacity building services which the OECD and the Global Forum on Transparency and Exchange of Information for Tax Purposes carry out with the crucial support of their donors and partner organizations.
The case studies cover different regions, income groups and topics – from tax base erosion and profit shifting and tax transparency to the joint OECD/UNDP Tax Inspectors Without Borders initiative.
See Case Study on Senegal
The OECD and the Cercle de réflexion et d’échange des dirigeants des administrations fiscales (CREDAF) signed a renewal of their Memorandum of Understanding (MoU) agreeing to extend their collaboration in promoting fair and efficient tax systems and enhancing the efficiency and effectiveness of tax administrations for a further three years.
Through this renewal of the MoU, which was originally signed in 2015, the OECD and CREDAF will continue to provide valuable capacity building and knowledge sharing in the areas of tax policy and administration, through joint seminars and other activities, building on the successful collaboration in the past. The joint efforts over the past years have been immensely beneficial for all parties involved.
CREDAF has been closely engaged with the work of the OECD in many key areas and became an Observer to the Global Forum on Transparency and Exchange of Information for Tax Purposes in 2012 and to the Committee on Fiscal Affairs (CFA) in 2016.