Strategizing International Tax Best Practices – by Keith Brockman

Archive for November, 2015

UN Tax developments

The UN Committee of Experts on International Cooperation in Tax Matters concluded their October meeting with several important milestones discussed.  A summary of the meeting is provided, and a reference to the Handbook on Selected Issues in Protecting the Tax Base of Developing Countries are provided for reference:

http://www.un.org/esa/ffd/special/11ictm-key-outcomes.html

http://www.un.org/esa/ffd/wp-content/uploads/2015/07/handbook-tb.pdf

Key points:

  • A new Article was adopted re: fees for technical services that will become a part of the new UN Model Double Tax Convention (DTC).
  • A new practical Manual for the Negotiation of Bilateral Tax Treaties between Developed and Developing Countries was adopted.
  • Subcommittee on Exchange of Information presented a draft “Code of Conduct” that will be updated in the October 2016 session.
  • The Committee also welcomed the work of UN DESA’s Financing for Development Office in the area of capacity-building, including the production of a “Handbook on Selected Issues in Protecting the Tax Base of Developing Countries.”
  • Two new subcommittees were formed:
    • Royalties re: updated Article 12 UN Model and commentary
    • Mutual Agreement Procedure (MAP) to review and propose updates to UN Model

On the heels of the OECD BEPS Guidelines, the UN developments will pave the way for many developing countries that lack the time and/or resources for implementation.  Accordingly, additional withholding taxes for services and withholding sources will be revealed to extract monies at source.  As a result, the UN initiatives are paramount to monitor and review accordingly.

These initiatives will also provide greater capacity for global disparity, with the BEPS Guidelines and UN changes in periods of transition re: domestic legislative actions around the world.

Public disclosures: Get ready!

As tax disclosures, more specifically the country-by-country (CbC) report, approach probable reality, what is your company doing to prepare for such transformation?

  1. Is the CbC report being prepared with perceptive gap Q & A’s addressed?
  2. Who is the first / primary point of contact for a public query – How are contact details communicated for global awareness?
  3. Is tax aligned with corporate communications re: who is responsible for preparing, delivering, answering queries?
  4. Are shareholders aligned in the process, to disclose or not disclose?
  5. Will tax posture change, via public disclosures, as public disclosures become more common?
  6. What is the impact of your peer companies providing proactive disclosures?
  7. Is there a process to monitor tax disclosures of peer companies for review, not to be surprised.
  8. Is there a similar process for internal queries as a response to ever-growing tax investigations / allegations in the public?

These questions highlight the priority needed to focus upon this new trend and proactively address this new world!  Tax authorities will be reviewing such disclosures, so multinational organisations should be also aware.

US FTC for UK DPT?

EY’s Global Tax Alert provides a summary of the US congressional developments, including a review for US Foreign Tax Credit (FTC) applicability of the UK’s Diverted Profits Tax (DPT) which went into effect April 2015.

This review highlights a renewed focus on receiving a US FTC for income that may have been taxed in another (low-tax) jurisdiction and for which a country asserts a right to tax in its jurisdiction.  The answer is not yet clear, and this analysis also points the way forward for similar tax measures being legislated by various countries.

http://www.ey.com/Publication/vwLUAssets/Report_on_recent_US_international_tax_developments_-_30_October_2015/$FILE/2015G_CM5920_Report%20on%20recent%20US%20international%20tax%20developments%20-%2030%20October%202015.pdf

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