4/11/2017 1 experience reach // CPAs & ADVISORS GLOBAL BASE EROSION & PROFIT SHIFTING (BEPS) UPDATE – TRANSFER PRICING DEVELOPMENTS April 11, 2017 TO RECEIVE CPE CREDIT Participate in entire webinar Answer polls when they are provided If you are viewing this webinar in a group Complete group attendance form with Title & date of live webinar Your company name Your printed name, signature & email address All group attendance sheets must be submitted to [email protected]within 24 hours of live webinar Answer polls when they are provided If all eligibility requirements are met, each participant will be emailed their CPE certificates within 15 business days of live webinar
Transcript
4/11/2017
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experience reach //
CPAs & ADVISORS
GLOBAL BASE EROSION & PROFIT SHIFTING (BEPS) UPDATE – TRANSFER PRICING DEVELOPMENTSApril 11, 2017
TO RECEIVE CPE CREDIT
Participate in entire webinarAnswer polls when they are providedIf you are viewing this webinar in a group
Complete group attendance form withTitle & date of live webinarYour company nameYour printed name, signature & email address
All group attendance sheets must be submitted to [email protected] 24 hours of live webinarAnswer polls when they are provided
If all eligibility requirements are met, each participant will be emailed their CPE certificates within 15 business days of live webinar
Overview of Base Erosion & Profit ShiftingAction Item #13 – Transfer Pricing DocumentationCountry DevelopmentsChallenges & Opportunities for Businesses
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OVERVIEW OF BASE EROSION & PROFIT SHIFTING INITIATIVE
OECD ACTION PLAN ON BASE EROSION & PROFIT SHIFTING
Organisation for Economic Co-Operation & Development’s (OECD) Action Plan on Base Erosion & Profit Shifting (BEPS)
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OECD ACTION PLAN ON BASE EROSION & PROFIT SHIFTING
What is the BEPS Action Plan? Action Plan issued on July 19, 2013 15 different action items designed to curb perceived practices that allow multinational corporations to engage in “aggressive tax planning” & transfer pricing schemes to shift profits from high tax to low tax jurisdictions62 countries (OECD & non-OECD) were directly involved in the BEPS Action Plan
Covers 90% of the global economyNGOs & other stakeholders were also involved
OECD ACTION PLAN ON BASE EROSION & PROFIT SHIFTING
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OECD ACTION PLAN ON BASE EROSION & PROFIT SHIFTING (BEPS)
• Three (3) tenets of BEPS action plan1. ‘New international standards must be designed to ensure the coherence
of corporate income taxation at the international level’• ‘BEPS issues may arise directly from existence of loopholes, as well as,
gaps, frictions or mismatches in interaction of countries’ domestic tax laws’
2. ‘A realignment of taxation & relevant substance is needed to restore the intended effects & benefits of international standards, which may not have kept pace with changing business models & technological developments’• Involvement of shell companies in third countries with little or no
substance in terms of office space, tangible assets & employees undermines preventing double-taxation through tax treaties involving two tax treaty countries
3. ‘The actions to counter BEPS cannot succeed without further transparency, nor without certainty & predictability for business’
OECD ACTION PLAN ON BASE EROSION & PROFIT SHIFTING
Address Challenges: Digital Economy (1)
Execution: Multilateral Instrument (15)
Coherence
Hybrid Mismatch Arrangements (2)
CFC Rules (3)
Interest Deductions (4)
Harmful Tax Practices (5)
Substance
Preventing Tax Treaty Abuse (6)
Avoidance of PE Status (7)
TP – Intangibles (8)
TP – Risk & Capital (9)
TP – High Risk Transactions (10)
Transparency & Certainty
Measuring BEPS (11)
Disclosure Rules (12)
TP Documentation (13)
Dispute Resolution (14)
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OECD ACTION PLAN ON BASE EROSION & PROFIT SHIFTING# Action Item Deliverable Status
1 Digital Economy Report Final (10/2015)
Model Provisions / Domestic Rules Final (10/2015)
Follow-up to address mismatches through branch structures Discussion Draft (8/2016)
3 CFC Rules Domestic Rules Final (10/2015)
Domestic Rules Final (10/2015)
Follow-up to address group ratio rule and industry (banking / insurance) matters Final (12/2016)
TP Guidelines Expected 2017
5 Harmful Tax Practices Criteria and framework for information exchange Final (10/2015)
Model Provisions / Domestic Rules Final (10/2015)
Follow-up to address treaty residence of pension funds Discussion Draft (2/2016)
Follow-up to address treaty entitlement of non-CIV funds Discussion Draft (3/2016)
Model Provisions Final (10/2015)
Follow-up to address attribution of profits to PEs Discussion Draft (7/2016)
Comments on discussion draft above Comments (9/2016)
TP Guidelines / Model Provisions Final (10/2015)
Follow-up to revise Chapter IX TP Guidelines Discussion Draft (7/2016)
Comments on discussion draft above Comments (8/2016)
Follow-up to address profit split method Discussion Draft (7/2016)
Comments on discussion draft above Comments (9/2016)
11 Measuring BEPS Recommendations Final (10/2015)
12 Disclosure Rules Recommendations / Exchange of Information Final (10/2015)
13 TP Documentation TP Guidelines (Revised Chapter V) Final (10/2015)
14 Dispute Resolution Model Provisions Final (10/2015)
Feasibility Report Final (10/2015)
Multilateral Instrument Final (11/2016)15 Multilateral Instrument
While the OECD drafted the 15 BEPS Action Items according to the deadlines initially established, not all Action Items have been finalized
• Action Items related to profit splits & profit attribution of permanent establishments have not yet been finalized• A second draft of profit split & profit attribution guidance is expected later in 2017
60 countries expected to sign on to the multilateral tax instrument agreement
• U.S. is not expected to sign the agreement• Countries can sign the agreement without implementing the model convention on
tax treaty language example: U.K. is not implementing the tax treaty language• Some countries are concerned with the permanent establishment definition used
in the model treaty• Signing day is June 7
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ACTION ITEM #13 – TRANSFER PRICING DOCUMENTATION
ACTION ITEM #13 – CHAPTER V – DOCUMENTATION
Guidance on Transfer Pricing Documentation & Country-by-Country (CbC ) Reporting includes the following sections
Annex I – Master FileAnnex II – Local FileAnnex III – CbC ReportGeneral instructions for Annex III to Chapter VSpecific instructions for Annex III to Chapter V
A THREE-TIERED APPROACH
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Multinational enterprise’s (MNE) organizational structure Description of MNE’s business or businesses Analysis of MNE’s supply chainInformation on MNE’s intangibles Information on MNE’s intercompany financial activitiesInformation on MNE’s financial & tax positions
MASTER FILE
ACTION ITEM #13 – CHAPTER V – DOCUMENTATION
MASTER FILE
ACTION ITEM #13 – CHAPTER V – DOCUMENTATION
Supplements Master FileFocuses on local intercompany transactions Contains the following
Financial information related to local country transactions Comparability analysis Application of most appropriate method
MASTER FILELOCAL FILE
LOCAL FILE
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COUNTRY-BY-COUNTRY REPORTCbC Report provides information on entities involved in intercompany transactions
Generally applicable for companies with €750 million or more in revenues
MASTER FILELOCAL FILE
CbC REPORT
ACTION ITEM #13 – CHAPTER V – DOCUMENTATION
COUNTRY DEVELOPMENTS
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AUSTRALIA & BEPS
Through the Federal Budget issued May 12, 2015, Australia adopted the BEPS transfer pricing documentation changes
CbC report required for companies with A$1 billion or more in revenuesEffective January 1, 2016Needs to be filed by December 31, 2017
Master File & Local Country File transfer pricingdocumentation required
Effective January 1, 2016Needs to be filed December 31, 2017Option for a Short Form Local Country File
Companies with less than A$2 million of aggregated intercompany transactions
Government committed A$679 million to increase ATO inspection effortsCreated a “Top 1,000” multinational & public company tax program
AUSTRALIA & BEPS
ATO’s analysis shows approximately 30% of large taxpayers did not pay Australian taxMultinational Anti-Avoidance Legislation
Used to counter arrangements trying to avoid a taxable presence
Diverted Profits TaxEffective for periods beginning on or after July 1, 2017Have 12 months to present evidence that the diverted profit was not excessive
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BRAZIL & BEPS
On November 4, 2016, Brazilian Federal Revenue Agency issues draft Normative Instruction which introduced CbC reporting
CbC Reporting – Group revenues greater than (€750 million) or BRL 2.26 billion if the MNC is headquartered in Brazil
Years beginning on or after January 1, 2016Filed with tax return (due July 31st of the following year)Required to notify the Brazilian tax authorities as to which entity will file the CbC reportNeeds to be filed in Portuguese, English or Spanish
Master FileNo references to Master FileDoes not have typical documentation requirementsFiscal Accounting Bookkeeping (ECF) filing is used to test transactions (due June 30 of following year)
Local Country FileNo references to Local Country File
BRAZIL & BEPS
Brazil does not follow the arm’s-length standard with regard to export & import transactions
Formulaic approach using fixed marginsMaximum price ceilings for deductible expenses on imports & floors on export marginsDoes not allow the use of profit-based methods such a comparable profits method/transactional net margin method or profit split
Creates potential for double-taxation for most MNCsAdherence to arm’s-length standard compared to local Brazilian rules
PenaltiesSelf-initiated adjustment – 20%Adjustment by tax authority – 75% to 150%Error on ECF – 3% of transaction price
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CANADA & BEPS
Proposed legislation pertaining to CbC reporting (issued July 29, 2016)CbC Reporting – €750 million
Years beginning on or after January 1, 2016Due 12 months after year-end
Master FileNo references to Master FileNo statutory requirement but existence of documentation negates penalties
Local Country FileNo references to Local Country FileNo statutory requirement but existence of documentation negates penalties
CANADA & BEPS
Treaty mattersCanada & U.S. have binding arbitration, which has lead to faster resolution of mutual agreement procedural cases
Forces the U.S. & Canadian officials to adhere to a deadline in order to avoid binding arbitrationCanada also has treaties with 19 other countries that have made a commitment to binding arbitration
EnforcementThe Canada Revenue Agency (CRA) has historically been aggressive with regard to transfer pricing enforcementPenalties have increased from U.S. $44.5m in 2012 to U.S. $364m in 2015 & $171m for the period up to June 30, 2016Average penalties
2012 – U.S. $2.62m2015 – U.S. $12.1mAs of 6/30/2016 – U.S. $9.5m
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CANADA & BEPS
EnforcementCanadian government has committed an additional U.S. $337m in its budget over the next five & plans on hiring 100 more auditors in the next few years for enforcement of transfer pricing issuesTP audits are being conducted through risk assessments & business intelligence supported through collaboration with its treaty partners Canada is committed to using artificial intelligence to identify TP avoidance & noncompliance
Deviation from BEPS deliverablesOn February 19, 2015, CRA issued two memorandums
Intra-group management services In contrast to the OECD Guidelines, the CRA indicated that a mark-up is not often appropriate; rather the services should be allocated at cost Certain expenses that are typically allocated as part of a management fee are not deductible in Canada, e.g., stock options, meals, entertainment, club dues, political contributions, etc.
Multiple-year data CRA prefers single-year data versus multiple year data
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CHINA & BEPS
Bulletin 42 (issued July 29, 2016) contains revised documentation requirements
CbC Reporting – RMB 5.5 billion thresholdYears beginning on or after January 1, 2016Must be filed with the new related-party disclosure forms for related-party transactions on May 31 of the year following the covered year
Master FileIf the PRC entity has total intercompany transactions in excess of RMB 1 billion ($150 million) or if the Master file has been prepared in home countryShould be prepared within 12 months of parent company’s year-end
Local Country FileThresholds: Total tangible goods transactions RMB 200 million (approx. $27 million); financial transactions RMB 100 (approx. $13.5 million); intangibles transactions RMB 100 million; or total of other intercompany transaction types exceeds RMB 40 million (approx. $5.9 million)Should be prepared by June 30 of following year
CHINA & BEPS
Key Considerations:China’s State Administration of Taxation (SAT) aggressively challenging transfer pricing outcomes for Chinese subsidiaries of multinational companiesEnhanced focus on value chain analysis, intangible assets & China-specific factors, e.g., location savings & market premiumSAT to challenge one-sided approaches that limit Chinese subsidiaries’ margins
Local file format includes several unique elementsValue chain analysisMarket premium & location-specific factorsContribution to group profit
New Disclosure FormsWith Bulletin 42, there are now 14 disclosure forms, which replace the previous nine forms
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FRANCE & BEPSFrance has adopted the BEPS transfer pricing documentation changes through the Finance Bill for 2016 passed on December 18, 2015
CbC report required for companies with €750 million or more in revenuesEffective January 1, 2016Failure to file results in a €100,000 penalty
Has not adopted the Master File/Local Country File transfer pricing formatStill need to maintain transfer pricing documentationThe “light” transfer pricing documentation still applies
Due six months after filing the corporate income tax returnIncludes a description of the company, transfer pricing policy & any changesVolume of intercompany transactions & analysis for transactions exceeding €100,000
Full transfer pricing documentation still required but only “light” documentation needs to be contemporaneous
FRANCE & BEPS
France is going after Google for tax evasion & money launderingUsing Google Ireland to channel profitsSeeking €1.6 billion in corporate tax & VAT Want to apply €10 million in fines
“Google tax” adopted as a diverted profits tax in the 2017 budget billWould assess anti-abuse penalties of 60%Effective for FY 2018Based on the location of the USER, not the location of the MNCSimilar to the U.K.’s diverted profits tax
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GERMANY & BEPS
Germany has adopted the BEPS transfer pricing documentation changes in legislation passed December 2016
CbC report required for companies with €750 million or more in revenuesEffective January 1, 2016
Master File & Local Country File transfer pricing documentation required
Effective January 1, 2017 & due by December 31, 2018The threshold for preparing a Master File is revenues of €100 million in the previous fiscal year
It has signed a multilateral competent authority agreement for the automatic exchange of CbC reports
Tax authority is aggressive when nonroutine functions are relocated outside GermanyWant to restrict deduction of license payments for royalty paid to a related party that is under a preferential tax regime, i.e., IP box
INDIA & BEPS
On February 29, 2016, India introduced new CbC reporting norms based on the OECD recommendations
CbC Reporting – €750 millionYears starting after April 1, 2016To be filed with the income return within eight months after the fiscal year-endPenalties of INR500,000
Master FileExpected to be adopted
Local Country FileExpected to be adopted. Existing local documentation rules apply
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INDIA & BEPSIndia Makes Progress with APA Program*
Program was introduced in 2012More than 700 applications for APAs have been received 141 APAs have been concluded (130 unilateral/11 bilateral)61 completed in last year
Address variety of TP issues, though most focus on IT/ITeS service transactions.*As of March 2017
Progress indicative of effort to be a less adversarial tax regimeDesire to increase manufacturing sector’s contribution to GDPBEPS Action 14 – Commitment to the effective & timely resolution of disputes through MAP
Unclear if India will adhere to mandatory & binding arbitration
*As of March 2017
INDIA & BEPS
Proposed new thin capitalization rules with Finance Bill 2017 (currently under committee review)
Would cap deductible interest to 30% of an Indian taxpayer’s EBITDA
BEPS Action Item 4 suggested an EBITDA limitation of 10% to 30%Provision applies when interest deduction exceeds 10 million rupeesBanking & insurance firms exemptEight-year carryover for excess interest
U.S. & India Resolve Intercompany Services DisputesMore than 150 disputes resolved via competent authority since January 2015U.S. & India agreed to a framework to reduce backlog of casesU.S. begins accepting bilateral APA applications with India
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IRELAND & BEPS
On October 22, 2015, the Irish tax authorities published Finance Bill 2015, establishing the requirement for certain transfer pricing documentation that aligns with the documentation standards of the OECD BEPS initiative
CbC Reporting – €750 million thresholdYears starting on or after January 1, 2016CbC report for year ended December 31, 2016 must be filed by December 31, 2017Taxpayers must notify tax authorities that they will be filing CbC report by December 31, 2016
Master FileNot yet required
Local Country FileNot yet required. Existing local documentation rules apply
IRELAND & BEPSCorporation Tax Code – Public Consultation
Announced October 2016 as part of 2017 budget proposalGoal is to maintain competitiveness, while complying with BEPS initiativesRequesting written submissions from public to provide perspectives on
Measures to achieve transparencyLegislative measures to combat BEPSMeasures to maintain competitiveness of the corporation taxSustainability of corporation tax receipts
Independent expert to review submissions & provide recommendations by end of second quarter of 2017
Apple Case UpdateEuropean Commission (via EU Competition Commission) ruled that Ireland provided Apple €13 billion in illegal “state aid” (August 2016)State aid was the selective tax treatment (via APAs) that unfairly provided benefits to Apple not available to other companiesIreland required to collect on back taxes & interestIreland & Apple have separately filed appeals with EUCJ on grounds the EC misapplied state aid rules & violated Ireland’s sovereignty in direct taxation matters
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IRELAND & BEPS
U.S./Irish Tax Treaty NegotiationsDiscussions to amend treaty announced August 2016 Intend to incorporate provisions of recently updated U.S. model treaty (2016)New provisions of U.S. model treaty intended to more effectively “eliminate double taxation without creating opportunities for nontaxation or reduced taxation through tax evasion or avoidance”Ireland has indicated goal is to implement recommendations of BEPS initiativeAs of December 2016, two rounds of negotiations have been completed
New Bilateral APA program effective July 1, 2016A formal APA program did not previously exist though Ireland has approved in pastEffort to comply with BEPS Action 14 which recommended such a program for dispute resolutionAllows for “rollback” to past years (in appropriate cases)
JAPAN & BEPSDuring March 2016, Japan’s parliament enacted transfer pricing documentation standards consistent with OECD
CbC Reporting – ¥100 billion (approximately $820 million) MNCs are required to notify the Japanese tax authority as to which legal entity will file the CbC reportRequired for fiscal years beginning on or after April 1, 2016 (in English)Due 12 months after year-endFine is ¥300,000
Master FileTaxpayers with group revenues in excess of ¥100 billion (approximately $820 million) Required for tax years beginning after April 1, 2016 & must be filed electronicallyFine is ¥300,000 for failure to file the Master File
Local Country FileContemporaneous documentation required for taxpayers with intercompany transactions totaling more than ¥5 billion (approximately $49 million) or intangible transactions totaling more than ¥300 million (approximately $2.9 million) Required for tax years beginning on or after April 1, 2017 – not required to be filed electronicallyDocumentation for smaller taxpayers does not have to be contemporaneous but must supplied to tax authority within 45 days, if requested
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JAPAN & BEPS
MAP & advance pricing agreement (APA) casesIn 2016, Japan reported 44 new MAP cases & 151 new requests for APAs68% of the new MAP cases & 17% of the new APA cases are with non-OECD member countriesDuring 2016, Japan’s inventory of unresolved MAP cases stood at 465 In 2016, APAs with OECD members took on average 26.0 months to resolve compared to 33.3 months for non-OECD members
Treaty networkJapan has a robust treaty network covering 107 jurisdictions
EnforcementAs of 2016, Japan has 203 TP specialists compared to 136 in 2007
SOUTH KOREA & BEPSDuring December 2015, South Korea’s legislature enacted transfer pricing documentation standards consistent with OECD
CbC Reporting –Required for MNCs with revenues equal to or exceeding ₩ 1 trillion (approximately $900 million)Due 12 months after year-endNotification to South Korean tax authority of the legal entity which will file the Cbc report is due six months after year-endFine of ₩ 10 million (approximately $10,000)
Master FileRequired for South Korean taxpayers with intercompany transactions totaling more than ₩ 50 billion (approximately $50 million) & the South Korean entity’s total revenues exceed ₩ 100 billion (approximately $100 million)Has to be submitted to tax authoritiesRequired for tax years beginning on or after January 1, 2016 Due 12 months after year-endMust be submitted in Korean within one month of English submissionFine of ₩ 100 million (approximately $100,000) for failure to comply
Local Country FileIdentical to Master File requirements
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SOUTH KOREA & BEPS
EnforcementSouth Korean tax authority is aggressive in pursuing transfer pricing adjustments & is perceived as not following accepted transfer pricing principlesDue to shortage of government funds, the tax authority is under pressure to increase tax revenues – leading to increased audits of MNCsSouth Korea uses the criminal code to enforce tax collections for TP issues Populace views MNCs as ‘tax evaders’
Mutual agreement proceduresAll nonresidents & foreign companies (even without a physical presence in South Korea) can make a MAP requestSouth Korean tax authority can deny a MAP request – must inform taxpayer & other country of the denial of the request
MEXICO & BEPS
On November 18, 2015 Mexico adopted the BEPS transfer pricing documentation changes as outlined in the Tax Reform Decree published in the Daily Official Gazette
CbC report required for companies with MXP 12 billion or more in revenuesMaster File & Local Country File transfer pricing documentation required if
Taxable income exceeds US$37 million;Publicly-traded;Companies under optional tax regimes for corporate groups;State-owned entities; ORMexican tax residents.
These changes are effective January 1, 2016 & the first information returns should be filed by December 31, 2017Noncompliance penalty can be as great as U.S. $11,000
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MEXICO & BEPS
Additional changes to transfer pricing legislation are expected
Part of Action Items 8 to 10, to align transfer pricing outcomes with value creation of intangibles & risk
Current thin capitalization rule remains in placeUse a 3:1 ratio
Maquiladora’s unilateral APAs with Mexico will be recognized as arm’s-length by IRSMexico requires companies to report self-initiated transfer pricing adjustments that deviate from the original value of the intercompany transactionMexico has discussed counteraction for any type of “border tax” the U.S. may implement
NETHERLANDS & BEPS
On December 22, 2015, Dutch Parliament approved the Other Fiscal Measures Bill which adopted the three tier approach to documentation
CbC Reporting – €750 millionRequired to be filed in the Netherlands if there is no home country requirement or filed in a nontreaty country, applies to fiscal years beginning January 1, 2016
Master FileRequired for taxpayers with consolidated revenues equal to or greater than €50 million Must be prepared by the time the tax return is filedFor smaller taxpayers, 2002 TP documentation rules apply (format should be per EU Code of Conduct guidance issued in 2013)
Local Country FileIdentical to Master File requirements for large-sized taxpayers
ATAD provides minimum standards for EU members against aggressive tax planningATAD 1 (2016) addressed exit taxation, interest limitation, CFC rules, general anti abuse rules (GAAR) & hybrid mismatches (among EU members)ATAD 2 (2017) amends ATAD 1 to include hybrid mismatches between EU members & third parties
European Parliament to issue opinion (expected April 26, 2017)Then formal adoption at ECOFIN Council meeting
ATAD TimingMember states must adopt general provisions in local rules by January 1, 2019, with enforcement to begin January 1, 2020Reverse hybrid entity rules must be adopted by January 1, 2021, with enforcement to begin January 1, 2022Payments to reverse hybrids nondeductible starting January 1, 2020
Major impact for Dutch CV/BV structuresCurrently, payments of interest / royalties from BV to CV (hybrid) are
Deductible in the NetherlandsNot recognized at the CV or U.S. level
Post adoptionDeduction to be denied (January 1, 2020)Netherlands will need to tax the CV (hybrid) (January 1, 2022)
UNITED KINGDOM & BEPSOn February 26 2016, the UK Treasury published CbC reporting regulations
CbC Reporting €750 millionYears beginning on or after January 1, 2016Penalties for noncompliance range from £300 to £3,000
Master File & Local Country FileUK has announced that it will be going to Master File/Local Country File format, but has not formalized requirementsExemptions from transfer pricing extensive documentation are as follows: small & medium-sized taxpayers: a) less than 250 employees; or b) turnover less than €50 million; or c) balance sheet less than €43 million. Taxpayers above this threshold are required to prepare TP documentation. However, it is recommended that medium-sized taxpayers prepare transfer pricing documentation
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UNITED KINGDOM & BEPS
CbC reporting made public2016 Finance Bill grants the Treasury power to compel companies to publish their CbC reports as MNCs tax strategies are required to be made publicGoal is transparency
Investment into U.K. – ignoring BrexitMcDonald’s to move European headquarters to U.K. from LuxembourgSnap, Inc. will record advertising revenues in the U.K. Google & Apple’s commitment toward investing in the U.K.
Google plans on adding 3,000 jobs by 2020U.K. is not seen as a tax haven – however, tax rate is 20% (17% by 2020)
UNITED STATES & BEPS
On June 29 2016, the U.S. IRS & Treasury released final regulations covering CbC reporting
CbC Reporting $850 million/€750 millionYears beginning on or after June 30, 2016Must be filed before due date of return (including extension)Penalties for noncompliance range from $10,000 to $50,000
Master File & Local Country FileDocumentation required but does not specify Master File or Local Country File format requiredNo exemptions from existing extensive transfer pricing documentation requirements
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UNITED STATES & BEPS
The U.S. has been an active participant of the BEPS project since inception (2013)Meets the minimum standards under BEPS
Key role in improving dispute resolution procedures (Action 14)Adopted Country-by-Country (CbC) reporting (Action 13)
Unlikely to sign the Multilateral Instrument (MLI) (Action 15) which would modify existing double tax treaties
U.S. (& other countries) have some reservations regarding language in agreement, e.g., definition of profit attribution for PEsDifficulty of gaining ratification in U.S. Senate
UNITED STATES & BEPS
Currently, focus is on negotiating bilateral competent authority (CA) agreements allowing U.S. filing of country-by-country (CbC) reports
Many foreign jurisdiction deadlines for CbC filing precede that of U.S.The U.S. will not sign the OECD’s MCAA to exchange CbC reportsWithout a CA agreement in place, CbC files would need to be filed in non-U.S. jurisdictions directly or via a non-U.S. subsidiary designated as a “surrogate parent”U.S. companies prefer to file with the IRS over data privacy concernsU.S. working to enter into bilateral CA agreements with jurisdictions party to tax treaties or tax information exchange agreements (TIEAs)
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OTHER COUNTRIES WHICH HAVE ADOPTED ALL THREE REQUIREMENTS
Austria Belgium Bosnia & Herzegovina
Colombia Denmark
Finland Gabon Indonesia Pakistan Peru
Poland Russia Spain Sweden Turkey
Vietnam
OTHER COUNTRIES WHICH HAVE PROPOSED TO ADOPT THE MAJORITY OF THE REQUIREMENTS
Chile (CbC & LCF) Curacao (CbC & LCF)
Greece (CbC, MF & LCF)
Hong Kong (CbC, MF & LCF)
Iceland (CbC, MF & LCF)
Isle of Man (CbC, MF & LCF)
Israel (CbC, MF & LCF)
Kenya (CbC, MF & LCF)
Latvia (CbC, MF & LCF)
Liechtenstein(CbC, MF & LCF)
Malaysia (CbC & MF)
Namibia (CbC, MF & LCF)
New Zealand (CbC, MF & LCF)
Nigeria (CbC, MF & LCF)
Norway (CbC, MF & LCF)
Portugal (CbC, MF & LCF)
Rwanda (MF & LCF)
Slovakia (CbC, MF & LCF)
South Africa (CbC, MF & LCF)
Switzerland (CbC, MF & LCF)
Taiwan (CbC & MF)
Uganda (CbC, MF & LCF)
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MULTILATERAL COMPETENT AUTHORITY AGREEMENT
The Multilateral Competent Authority Agreement (MCAA) specifies details of information exchange during CA proceedings• A tax cooperation agreement that will allow for the automatic exchange of CbC
reports• Work will begin on the development of an electronic data transmission
platform that can encrypt the data when transmitted to other treaty partnersCurrently the MCAA has 87 signatoriesU.S. has not signed the MCAA
CHALLENGES & OPPORTUNITIES FOR BUSINESSES
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CHALLENGES & OPPORTUNITIES FOR BUSINESSES
CHALLENGESMonitoring relevant countries’ adoption of BEPS guidelines & the compliance associated with the changesCbC reportingKeeping abreast with various tax authorities for transfer pricing guidance
CHALLENGES & OPPORTUNITIES FOR BUSINESSES
OPPORTUNITIESClean up global structures as issues may be exposed via CbC reportingTrain personnel to handle compliance & audits on a similar basisLook at tax policy & past planning & the need to modify because of BEPS
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QUESTIONS
The information contained in these slides is presented by professionals for your information only. Applying specific information to your situation requires careful consideration of facts & circumstances. Consult your BKD advisor before acting on any matters covered herein or in these seminars.
BKD, LLP is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.nasbaregistry.org
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CPE CREDIT
CPE credit may be awarded upon verification of participant attendanceFor questions, concerns or comments regarding CPE credit, please email the BKD Learning & Development Department at [email protected]
THANK YOU
FOR MORE INFORMATION // For a complete list of our offices and subsidiaries, visit bkd.com or contact:
Elizabeth Hazzard // Senior Managing Consultant [email protected] // 314.231.5544
