Strategizing Multinational Tax Risks

The drive for additional transparency, among efforts by countries to implement anti-avoidance rules that trump tax treaties, continues with the latest round of BEPS updates, as EY’s Global Tax Alert provides added insight:

Click to access 2016G_00921-161Gbl_The%20Latest%20on%20BEPS%20–%209%20May%202016.pdf

Highlights:

•  Australian Tax Office (ATO) release of 4 tax alerts for issues of concern, a Diverted Profits Tax (DPT) is to be implemented, hybrid mismatch arrangements will be addressed in legislation, and the effective date for the new/revised OECD’s arms-length principle standards will move forward to 1 July, 2016.
• Ecuador: the most recently version, as of 1/1 of a taxpayer’s year, of the OECD’s Guidelines will be used as transfer pricing reference absent domestic rules.
• Hungary: A “modified nexus” IP approach will come into force.
• Netherlands: The innovation box rules will be amended to comply with OECD’s Action 5 guidelines.
• New Zealand: Domestic anti-avoidance rules will trump double treaty arrangements.
• Taiwan: CFC rules will be promulgated.  
• Turkey: An “electronic place of business” draft legislation would empower taxation.
• Ukraine: A working group is forming anti-BEPS measures for consideration.
• US: Treasury is trying to extricate itself from its 1-year lag in obligatory country-by-country (CbC) reporting, although global acceptance is not expected.

The impact of BEPS is still accelerating, although the efforts by countries to avoid treaty provisions will provoke additional disputes and double taxation.  Accordingly, the veil of anti-BEPS legislative efforts overshadows mutual transparency and collecting a fair share of tax while avoiding double taxation.  Thus, all multinationals should be extra vigilant in the new era of international tax for additional documentation and support for significant transactions with low-tax countries.