In your view, how has BEPS impacted on the government’s tax policies?
Tax (3rd edition)
As previously stated (see 11 above), the Swiss government has taken the BEPS recommendations very seriously and is actively working on implementing them into Swiss law.
However, it should be noted that Swiss voters have the power to oppose changes to legislation through a referendum. This means that the government’s plans are sometimes thwarted by popular vote, which is what happened with the Corporate Tax Reform Act III.
While not adopting the BEPS action items relating to transfer pricing, the IRS has at times taken positions in transfer pricing examinations that are similar to the principles of the BEPS project. Transfer pricing regulations adopted by the previous administration (TD 9738, Sept. 2015) provide for aggregation of related transactions to ensure “full value” is captured by a transfer pricing method. As noted above, TCJA also amended Code Section 482 to provide for the aggregation of related transactions where necessary to achieve appropriate results.
The US’s adoption of the new worldwide tax system for GILTI addresses the concerns of the BEPS project by providing for a global minimum tax of 10.5% on most foreign profits of US multinationals.
BEPS is not likely to have a significant impact on Canadian tax policies, as its tax system already addresses most of the concerns raised by BEPS. The BEPS initiative coincides with a period in which the Canadian government has been placing a greater focus on the international tax system, including devoting greater resources to international tax audits and tweaking its domestic tax legislation to address aggressive international tax planning strategies by taxpayers. These legislative changes include the introduction of foreign tax credit generator rules, foreign affiliate dumping rules and tightening the thin capitalization rules. These changes occurred independently of the BEPS initiative. Further, the Canadian government had introduced an anti-treaty shopping rule to its domestic tax legislation. However, this proposal was abandoned in favour of participating in the BEPS initiative on treaty shopping.
The governmental program of the new Austrian government states per December 2017 that within the next 5 years the issue of a digital PE (see also BEPS Action 1) shall be addressed by the Austrian legislator. In March 2018 the EU commission published two drafts for directives regarding the enactment of a digital service tax (as a short-term solution) and of digital PEs (as long-term solution). Due to ongoing discussions in this field on European level general concessions of EU Finance Ministers have been achieved, but no concrete porgress has been achieved so far.
The Austrian domestic GAAR provision has been changed in the annual Tax Amendment Act 2018, see in that respect also question 11 above). Some of the Austrian double tax conventions will be amended by the MLI in this respect, implementing the principal purpose test of Art 7 of the MLI.
As regards the provisions relating to the creation of a PE by commissionaire structures, as suggested by BEPS Action 7, Austria has made a reservation in the MLI, as it is of the opinion that its interpretation of the existing treaties already allowed such interpretation in some cases. Whether this will be accepted by the courts remains to be seen.
BEPS have already largely influenced the French government's tax policies by anticipating the enforceability of the hybrid-mismatches and also the country-by-country reporting, and will keep making a difference. French government's negotiations of new and/or renewal of double tax treaties will be impacted in a major way by the signature of the multilateral international convention. This situation may even bring up again the European discussions around a common taxation (ACCIS project).
The policy of successive Cyprus governments over the years has been to provide a competitive tax environment that is fully compliant with international best practice, and Cyprus has always been an early complier with OECD and other international initiatives. We expect that policy to continue.
Brazil has implemented several procedures and regulations to comply with BEPS. Among other implementations, both exchange of information and fiscal transparency have been fully observed.
Brazil shall implement the remaining measures as soon as it becomes a full member of OECD.
While Germany has many features of the BEPS project already in place, it still is reviewing its existing laws for specific additional changes necessary to be in line with the BEPS project.
Ireland has long been an active participator and supporter of the BEPS project, recognizing the importance of transparency on tax matters and the need for greater co-ordination of international tax rules to ensure there are no gaps open to exploitation. Ireland is likely to continue to be involved in this process at an EU and OECD level.
The cornerstone of Irish tax policy remains the 12.5% corporation tax rate, which is not going to change. Otherwise tax policy is focused on ensuring a transparent tax system with a broad base, which is designed for businesses that want to innovate and create employment. By adopting and sticking to a corporation tax system that is sustainable and which meets the highest international standards, Ireland should be in a position to offer certainty to businesses.
We expect to see amendments to domestic legislation, adoption of regulations and the publication of guidance and ITA positions as well as entering into treaty discussions with Israel’s treaty partners, aimed at implementing the OECD recommendations. Israel is a signatory to the Multilateral Instrument (“MLI”) which we expect will be gradually implemented in the coming few years. Proposed legislation to implement transfer pricing master and local filings has already been published.
In addition, the ITA has independently been taking steps in this direction. For example, in 2016 the ITA published guidance addressing income taxation of non-Israeli Internet companies selling goods or providing services to the Israeli market through the Internet as well as the VAT liability of Internet services companies. The guidance generally provides new and broader interpretations to the definitions of a permanent establishment through dependent agents and fixed places of business and expands the VAT registration obligation of non-Israeli companies active in the Israeli market. In addition, and consistent with the OECD’s so-called “nexus approach” relating to intellectual property preferential tax regimes, recently enacted legislation provides for preferential tax rates to technology and hi-tech companies with respect to income derived from intellectual property development activities carried out in Israel (see more below).
Participation in the BEPS Framework has propelled Malaysia’s drive to adhere to the global commitment to improve global transparency, identify the movement of global wealth flows and eliminate tax avoidance.
Through legislation, Malaysia has enacted various provisions setting out the information to be collected and reported by financial institutions of participating jurisdictions, which include financial account information, financial institutions required to report, the different types of accounts and taxpayers covered, implementation timelines as well as common due diligence procedures to be followed by financial institutions to promote and encourage disclosure.
As a member of the OECD, Mexico has been participating in the development of the BEPS action plans, and many of its recommendations have already been included into its domestic legislation.
As mentioned above, Norway has already implemented a number of the BEPS Actions and made several amendments to Norwegian tax legislation in order to be in line with the BEPS recommendations. Further amendments may be introduced in the time to come, and in our view the BEPS initiative will have a big impact on the Norwegian Government's tax policies going forward.
Panama has acquired a short-term commitment to implement the minimum requirements under BEPS, this has led to various implementation changes such as, creation of tools for CRS reports, internal regulations for the exchange of information under CRS, modification in the transfer pricing form according to action 13 of BEPS, review of the existing special tax regimes under action 5.
Tax policies adopted for Panamanian Government is to comply with and accept the guidelines of the BEPS as part of the local legal system with ways to support the elimination of tax evasion.
The Tax Reform for Acceleration and Inclusion (TRAIN) is comprehensive tax reform package that is now pending with the Philippine Congress. The TRAIN is composed of five (5) packages dealing with different areas of taxation. However, none of the packages contain proposals on the adoption of any of the BEPS Action Plan points in the Tax Code. Thus, it seems that adoption of the BEPS Action Plan is not an immediate priority in the government’s tax policies.
Portugal is a member state of the EU and of the OECD, and so most of BEPS policies were either already implemented or are under implementation/consideration.
The need to implement BEPS actions has in general reinforced what was already a tendency of the Portuguese law to prevent tax evasion and impose more transparency and compliance on business activities.
Italy participated to the works of the OECD on the BEPS initiative and is likely to implement BEPS related measures. From an international perspective, Italy signed the OECD Multilateral Convention and included some of the measures recommended by the OECD in some of its most recent tax treaties (such as the treaty with Chile).
In parallel with international development, important issues such as CFC and TP are described in detail in a new corporate tax law. As a long-time member of the OECD, Turkey exhibits a positive attitude toward adopting the policy and comments of the OECD voluntarily. Therefore, we predict that BEPS certainly will affect the policies of the country. The government in Turkey intends to make new arrangements for tax incentives in order to make Turkey more attractive to foreign investors. However, the accumulation of international tax knowledge has progressed very slowly in Turkey, since it is a quite new topic of discussion. We believe the Turkish government will make more actions and speed up the process in order to overcome economic problems.
Japanese multinational corporations are generally far less active in aggressive tax planning as compared to those in Western jurisdictions, and the Japanese government is not very much concerned about BEPS to be caused by Japanese multinational corporations. Rather, Japan seems to be of a view that the BEPS initiatives may be a good opportunity for Japanese multinational corporations to enhance their international competitiveness, where Western multinational corporations would have much more difficulty to continue their aggressive tax planning. As such, the main focus of Japan in terms of the BEPS initiatives seems to be in concert with the international community in the domestic adoption of the Action Plans and at the same time to take care so that the adoption will not cause overly onerous administrative burden on the side of Japanese multinational corporations (where they are not doing any aggressive tax planning). In any event, it is fair to say that Japan will continue to domestically implement the remainder of the BEPS Action Plans from these viewpoints.
The Netherlands has already changed its tax law in accordance with some of the BEPS action points and we expect that the Netherlands will continue to implement these BEPS action points. The BEPS project does have a substantial impact on the government’s tax policies.
The implementation of the measures from the BEPS project is currently determining several key changes in the Romania tax legislation. It seems to be clear that these measures provide to the tax authorities additional instruments in achieving one of the key focus areas of the BEPS project, respectively increasing the collection of funds in the source states, where activities are performed / the value is created. Also, these instruments may offer the authorities a better visibility over the cross-border transactions and transfer pricing. A taxpayer should be aware about a greater transparency related to their assets, activities, functions, cash movements, etc.
The policy of successive Gibraltar governments has been to provide a competitive tax environment that is fully compliant with international best practice, and Gibraltar has always been an early complier with OECD and other international initiatives. We expect that policy to continue.
The UK Government considers it is ahead of the curve. Therefore unlikely to be any change in existing policies.