As everyone knows, there is alot of uncertainty and doubt about what lies ahead for the UK as they will be leaving the EU, final timeline yet to be determined.
From a tax perspective, the linked EY Global Tax Alert summarily describes foreign exchange issues, alignment with EU court cases and Directives (including country-by-country reporting), ongoing BEPS alignment and conformity, treaty / immigration issues, EU State Aid, VAT and the need for transitional review.
Apart from BEPS, this change will compound the tax (un)certainty of the UK for the near future.
This is an excellent time for legal and operational review of UK operations, ensuring old structures and loans are dissolved, if possible, to mitigate future risks. All multinationals should align with all stakeholders to face this radical change.
The controversial final Section 385 regulations are still being debated, with Treasury focusing on earnings stripping issues, although seemingly has heard valuable comments as to its detrimental effect on physical or notional cash pooling. Every MNE should have read the proposed Reg’s and educated their treasury and finance functions accordingly, which should be an immediate priority due to its expansive potential effect on treasury, legal and tax structures going forward.
The US House is set to release its tax blueprint next week, which may become more important if a Republican president is elected with potential reforms again in play.
EY’s Global Tax Alert discusses these topics and some BEPS updates.
EY’s Global Tax Alert provides recent developments for BEPS by Australia, Austria, Belgium, EU, Germany, Iceland, India, Niger, and Romania.
- Australia: Local File is OECD +, going beyond OECD’s recommendations, including transactional detail. This development is proving that global consistency is a rapidly fading ideal, as countries legislate what they think benefits them the most. Unfortunately, this adds to the cost, time and complexity of preparing global reports.
- Austria: Transfer pricing documentation draft regulations follows the OECD.
- Economic and Financial Affairs Council of the European Union (ECOFIN): EU Member States Finance Ministers, envision adopting the Anti-Tax Avoidance Directive on 17 June 2016, subject to amendments. Legal agreement was also reached on adoption of the Directive on the exchange of non-public country-by-country tax information. Conclusions were also adopted on the European Commission communication on an external tax strategy and tax treaty abuse measures.
- Germany: Transfer pricing technical draft introducing transfer pricing documentation standards as recommended by the OECD. Master File and Local File documentation requirements introduced.
- India: A 6% Equalization Levy (EL) to apply on gross payments for certain digital services received by a nonresident.
- Niger: Thin capitalisation rules introduced.
- Romania: To become a BEPS Associate and participate in the OECD’s framework.
As the above developments note, BEPS guidelines and intent remains very strong in the global community, with many changes already made and many more to come.
EY’s Global Tax Alert highlights some significant areas of proposed reform:
- Section 385 debt/equity regulations proposed for Labor Day issuance, noting there is alot of uncertainty until then based on the Proposed Regulations, including the impact on physical and/or notional cash pools.
- US House tax reform blueprint to be released this month.
- Country-by-country (CbC) voluntary reporting is being acknowledged as a gap and problematic for US based MNE’s, thus one US CbC global report is not anticipated to be the result, requiring multiple CbC reporting required by relevant countries. For countries that have agreed to accept voluntary filing, it would be beneficial to provide a simple public chart by the administration for taxpayer access.