Are there any plans for the implementation of the OECD BEPs recommendations and if so, which ones?
For many years Cyprus tax policy has been based on offering an internationally competitive tax environment that is fully compliant with international best practice and the highest standards of transparency and fairness. In line with this commitment Cyprus is currently revising its intellectual box regime to comply with the modified nexus approach put forward by the OECD.
Although the Greek Tax System is difficult to adjust, most of the actions have already implemented. The following actions are expected to be implemented, but the time has not been determined:
• Hybrids (Action 2)
• Prevent treaty abuse (Action 6)
• Disclosure of aggressive tax planning (Action 12)
• Dispute resolution (Action 14).
Turkey currently implements many of OECD BEPs recommendations regarding transfer pricing, permanent establishment, monitoring and tax treaties.
A considerable number of the OECD BEPs recommendations were, in effect, already reflected in the law of England and Wales. For example, in relation to Action 3 (Designing Effective Controlled Foreign Company Rules), the UK updated its CFC rules in 2013 and therefore further changes were deemed to be unnecessary at present. However, the UK is planning to implement a number of the OECD BEPs recommendations that are not already enshrined in law. For example, legislation designed to implement new rules relating to Actions 2 (Hybrid Mismatch Arrangements) and 4 (Base Erosion Involving Interest Deductions and Other Financial Payments) are likely to enter into force in early 2017.
Mexico participated actively in the development of the Base Erosion and Profit Shifting (BEPS) Action Plan. Consequently, since the tax reform of 2014, the local set of laws have been amended in order to abide by the standards set forth therein. In this regard, more stringent conditions and requirements have been established relating to hybrid mismatches (Action 2), controlled foreign corporation rules (Action 3), treaty abuse (Action 6), transfer pricing rules (Actions 8 through 10) and reporting obligations (Action 13).
We are not aware of any current intentions.
Yes, Japan is very active in following the BEPS action plans so far published, as the country that chaired the relevant OECD Committee.
To date, Japan has implemented or will implement the following BEPS action plans by amending its domestic tax law or tax treaties:
- Action plan 1: Japan has amended the consumption tax law to tax upon digital or electronic services transactions conducted by foreign enterprises having no base in Japan.
- Action plan 2: Japan has amended the corporation tax law so that Japan’s foreign dividend exemption system does not apply to dividends that are deductible under the local tax law of the jurisdiction of the foreign subsidiary, in order to prevent double exemption.
- Action plan 3: Japan will overhaul its current CFC regime by amending the income tax law and the corporation tax law by the 2017 annual tax reform, in line with the action plan 3, to give more focus upon the substance of the business conducted by the CFC. The details of the amendment will only be available in February 2017.
- Action plan 6: Japan has incorporated in its tax treaties particularly with advanced countries (such as the U.S., the U.K., the Netherlands, Switzerland and Germany) various anti-abuse measures suggested by the action plan 6, such as the limitation on benefits (LOB), the principal purpose test (PPT) and the beneficial owner concept.
- Action plan 13: Japan has amended its transfer pricing documentation rules to introduce the master file, the country-by-country reporting and the local file, in line with the action plan 13.
In addition, Japan will continue its review of whether it is necessary, and if so, by what measures the action plans should be implemented, as to the other action plans.
On 26 October 2016, Hong Kong published a public consultation paper seeking views and comments on the implementation of the BEPS package in Hong Kong. It aims to introduce new measures into the Legislative Council by mid-2017. While Hong Kong intends to preserve its simple and low tax regime, it will focus on codifying the international standard of transfer pricing legislation and transfer pricing documentation requirements : (i) countering harmful tax practices by spontaneous exchange of information on tax rulings (Action 5), (ii) anti-treaty abuse rules (Action 6), (iii) transfer pricing rules in light of the Organization for Economic Co-operation and Development's (OECD) Model Tax Convention and transfer pricing Guidelines (Action 8 to 10), (iv) transfer pricing documentation and country-by-country (CbC) reporting whose exchange will rely on current CDTAs and TIEAs (Action 13) , (v) statutory cross-border dispute resolution mechanism (Action 14), (vii) implement of Multilateral Instrument (MLI) in early 2017 to prevent treaty-shopping (Action 15) and (viii) enhancement of the Hong Kong credit tax system.
Many of the BEPS recommendations are embodied by the rules already in effect in the U.S. For example, Treasury views the BEPS recommendations on transfer pricing (Actions 8-10) as being consistent with the arm’s length standard under the existing section 482 regulations.
The U.S. has released proposed revisions to the U.S. Model Income Tax Convention to reflect the BEPS project, which included changes to the Limitations of Benefits article (Action 6), to special tax regimes (Action 5), and certain aspects of permanent establishments (Action 7).
The U.S. has also taken steps to implement CbC reporting (Acton 13), but has not adopted the other aspects of Action 13 including the “Master File” requirement.
With respect to interest deductions (Action 4), the US took a decidedly different direction than the BEPS recommendations by issuing new recharacterization rules and documentation requirements, which is different than the fixed ratio approach contemplated by Action 4.
The amendments to Spanish tax law were enacted as part of the global tax reform which took effect as of 1 January 2015 and also included some provisions related to the OECD BEPS project, such as stronger CFC rules and limitations on tax deductibility of financial expenses. In fact, Spain has recently signed the OECD’s multilateral instrument being developed under Action 15 that will allow countries to update all their bilateral tax treaties in line with the OECD proposals.
As regards the existence of permanent establishments (PE) for tax purposes, Spanish Tax Administration is taking a more economic approach to the PE definition and stricter positions on the related tax treatment.
In addition, Spain’s current tax treaty policy is to negotiate the inclusion of limitation on benefits clauses and anti-hybrid provisions.
A number of OECD BEPs recommendations are already implemented in the tax framework of Austria. Austria has already implemented country by country reporting (CbC). Austria is one of the countries that signed a multilateral competent authority agreement for the automatic exchange of CbC reports.
In addition in the field of corporate tax interest and royalty payments paid to related companies in low tax jurisdictions are not tax deductible in Austria.
Even before the BEPS discussion gained momentum at the OECD and the EU, Germany had already adopted many rules that are now part of the OECD recommendations. For example, Germany has already operated for many years broad CFC-rules, an interest deduction barrier (Zinsschranke) and several anti hybrid-rules, just to name a few. In addition, Germany is currently in the process of adopting new laws, which implement some of the OECD recommendations (in particular, introducing country-by-country reporting and enhancing tax transparency).
As an EU member state, Belgium must transpose Directive 2016/1164 of July 12th, 2016 laying down rules against tax avoidance practices that directly affect the functioning of the internal market (also known as the anti-tax avoidance directive or ‘ATAD’). ATAD must be transposed into Belgian law with effect from January 1st, 2019.
ATAD includes 5 important measures against tax avoidance that are largely inspired by the OECD BEPS recommendations: an interest limitation rule, exit taxation, a general anti-abuse rule, a CFC rule, and the prevention of hybrid mismatches.
Some of these rules already exist in Belgian tax law, such as the exit taxation and the general anti-abuse rule (see infra).
In addition, it is expected that Belgium will sign and ratify the Multilateral Convention implementing tax treaty-related measures to prevent BEPS (also known as the Multilateral Instrument or ‘MLI’) and to make this convention effective to the widest possible extent.
Italian tax legislation already includes many rules that are shown in the list of the OECD recommendations on BEPS, such as CFC-rules, an interest deduction barrier, anti-avoidance rules, TP rules, enhanced tax cooperation and transparency.
The Italian Government and Italian Tax Authorities are committed to implement the OECD recommendations on BEPS matters with a view to contrasting international tax evasion and are working on the adoption of new legislation (e.g. on the taxation of the digital economy distortions). Moreover, in recent years, Italian Tax Authorities have already focused their attention and subject to tax audits some of the major digital economy multinationals (such as eBay and Google) on the basis of the existing anti-abuse rules.
In 2017, Malaysia has amended its domestic tax law to implement OECD BEPS recommendation on Action 13, which is on Country by Country Reporting.
Ireland has actively engaged with the OECD BEPS project and supports the OECD in carrying out the BEPS project. Ireland has undertaken public consultation on the proposals as part of its ongoing assessment of the country’s corporate tax policy. Ireland has broadly welcomed the final BEPS reports, in particular on the alignment of substance with taxation and the importance of the arm’s-length principle. Ireland will implement all mandatory BEPS provisions. In addition, Ireland will implement the EU anti-tax avoidance directive which contains some non-mandatory BEPS actions.
When the OECD issued the BEPS recommendations, France had already introduced several rules aiming at fighting tax fraud and evasion which have been reiterated in the BEPS action plan: CFC rules, transfer pricing rules, anti-hybrid provisions and specific provisions limiting the deductibility of interest expenses. So, even if there isn’t any formal plan regarding the introduction of the BEPS recommendations into French law, the FTA have always been committed to tackle the issue of tax fraud and evasion.
Australia has expressed strong support for the OECD's BEPS project and has indicated its intention to incorporate the recommendations into domestic law. However, Australia has yet to make its final decision on adopting the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting which would implement rapid changes to Australia's bilateral agreements to give effect to the BEPs recommendations. Submissions to the government closed on 6 February 2017. Please see the discussion in section 19 for further discussion of BEPS with respect to the Australian transfer pricing regime.
The Federal Council adopted the dispatch on the multilateral agreement on the exchange of country-by-country reports and the federal act required for its implementation. Switzerland is currently implementing the minimum standard of the OECD BEPs recommendations that could enter into force at the end of 2017.
As a result, multinationals in Switzerland would thereby be obliged for the first time to draw up a country-by-country report for the 2018 tax year. The exchange of country-by-country report between Switzerland and its partner states could therefore take place in 2020.