The most exciting news must be that we can expect an updated version of the OECD Guidelines, this week. I have already put it on my wishlist. It should facilitate the reading between the BEPS Action points and the previous OECD Guidelines quite a bit. The info itself is already out there, but we all love a shiny new book, well I do.
Also the OECD mentioned that it will add an online database to its website in July to facilitate the matching of countries’ reservations in the respective MLIs. The OECD is now consulting with countries to check over 150,000 data points to ensure the accuracy of the database. Considering all the reservations this should assist in applying the right clauses.
The OECD has also provided the latest numbers on the implementation of legal frameworks. In summary they are:
- 55 jurisdictions have taken steps to implement a CbC filing obligation on MNE groups
- 30 jurisdictions already have a full legal framework for CbC Reporting in place
- 38 jurisdictions are implementing an obligation to submit a master file and local file
- Over 850 bilateral exchange relationships have been activated under the CbC MCAA to date
- Seven jurisdictions signed the CbC MCAA on 21 June 2017, bringing total signatories to 64
The OECD’s Centre for Tax Policy and Administration had its latest tax updated. If you missed it, here is the recording. And lastly, I also came across a video from Moody’s providing a comprehensive approach to intercompany loan transfer pricing. I have not yet watched it but thought I share it, let me know your thoughts on it.
“The approach of the Federal Inland Revenue Service (FIRS) on Transfer Pricing (TP) audit, with respect to taxpayers is adversarial and aggressive, KPMG Transfer Pricing Awareness Survey 2017 has shown…
It showed that 46 and 36 per cent of the respondents considered the FIRS stance on TP audit as ‘aggressive’ and ‘very aggressive’ respectively, while only 18 per cent viewed the Service’s stance as ‘friendly.’…”
This is in line with what I have experienced. But lets be honest is there such a thing as a friendly tax authority which is auditing you for TP. The tax authorities will always ask ‘uncomfortable’ questions and request information as soon as possible. The best approach is just to have your house in order (but that is no guarantee that you will be left alone).
The below article provides some insight as to why tax authorities are more and more aggressive. They keep on finding more.
“The war on tax evasion among corporates through a multi-agency task force has yielded about Sh2 billion since March 2015, the Kenya Revenue Authority director-general John Njiraini said yesterday.
Another 30 cases involving corruption and economic crimes are still being investigated through the task force, he added. The cases largely involve multinationals, and are at different stages of being resolved through the Alternative Dispute Resolution framework and recovery of assets…”
“The Internal Revenue Service has created a new section on its IRS.gov website dedicated to information on the Country-by-Country Reporting rules of the Organization for Economic Cooperation and Development’s Base Erosion and Profit Shifting project, which aims to discourage tax avoidance by multinational companies.
The new Country-by-Country Reporting web pages offer some background information, along with frequently asked questions and other resources, including a list of jurisdictions that have Competent Authority Arrangements with the U.S. government…
As part of that effort, U.S. parent companies of multinational enterprises with $850 million or more of revenue in the relevant preceding annual reporting period are supposed to file Form 8975 and Schedules A (Form 8975) (also known as the “CbC Report”) with their annual income tax return…”
I think all jurisdictions should do this.
“Sri Lankan companies that violate transfer pricing rules can be fined up to two percent of the total value of transactions between related parties in case of non-disclosure of any required information under the new tax law.
The new law also provides for the Commissioner-General of Inland Revenue to impose a penalty of up to one percent of the total value of transactions with associated enterprises where required documents have not been maintained.
The new Inland Revenue bill is to be presented to parliament shortly and may become law over the next two months after extensive debate, ministers have said…
Intermediaries are firms or persons, such as consulting firms, banks, lawyers, tax advisors, accountants, etc. which can help their clients to set up schemes to reduce their tax bills.
Most services provided by intermediaries are legitimate. However, recent cases, such as the Panama Papers, exposed the role that some of these intermediaries may play in international tax avoidance and evasion by designing schemes that are specifically set up to help their clients escape taxation…”
This is a great step. A lot of MNEs will ask these intermediaries what they should do and as such they have some responsibilities too.