Strategizing International Tax Best Practices – by Keith Brockman

Posts tagged ‘Common Reporting Standard’

OECD: Model CRS disclosures

The Model Mandatory Disclosure Rules for CRS Avoidance Arrangements and Opaque Offshore Structures contained in the referenced report were approved by the Committee of Fiscal Affairs (CFA) on 8 March 2018.  These represent Best Practices.

15 July 2014 the OECD published the Standard for Automatic Exchange of Financial Account Information in Tax Matters, also known as the Common Reporting Standard or CRS. Since then 102 jurisdictions have committed to its implementation in time to commence exchanges in 2017 or 2018.

The report includes CRS disclosure rules and related penalty requirements.

One of the most discussed aspects of the new report is the following:

  • Rule 2.7: Disclosure of Arrangements entered into after 29 October 2014 and

    before the effective date of these rules

    1. (a)  A Promoter shall disclose a CRS Avoidance Arrangement within 180 days of the effective date of these rules where:
      1. (i)  that Arrangement was implemented on or after 29 October 2014 but before the effective date of these rules; and
      2. (ii)  that person was a Promoter in respect of that Arrangement;

      irrespective of whether that person provides Relevant Services in respect of that Arrangement after the effective date.

Most importantly, “jurisdictions implementing these model rules would need to take into account domestic specificities in their own CRS Legislation and the interaction of these model rules with existing anti-avoidance rules.”

The hallmark for a CRS Avoidance Arrangement captures any Arrangement where it is reasonable to conclude that it has been designed to circumvent, or has been marketed as or has the effect of circumventing CRS Legislation.

To the extent such rules may be applicable, this new report should be reviewed in its entirety to understand potential disclosure requirements in a timely manner.

Australia’s Budget: BEPS acceleration

Australia’s Budget reveals its intent on becoming a leader in tax transparency and implementation of tools to address anti-avoidance initiatives.  The provisions cite OECD BEPS initiatives, while deciding to act unilaterally on draft guidelines and introducing new transparency standards within its various proposals.

This Budget may set the stage for others to follow similar trends and timelines; accordingly such actions should be monitored in Australia as well as the rest of the world.  The Public Tax Transparency Code is another signal that reporting of economic and tax activity will be used as a public measure to assess reasonableness for determining payment of a “fair share of tax.”

MNE’s have now fully realized the impending complexity, documentation demands and transparency standards that it will be judged by.  Internal education, communication and alignment are now vital in establishing a MNE’s global tax risk framework.  

A link to the Budget actions is provided for reference:

Key Corporate Tax provisions:

  • Multinational Anti-Avoidance Law
    • Economic Australian activities = Australian taxation income
    • Penalties up to 100%, plus interest
  • Country-by-Country (CbC) reporting effective as of 1/1/2016, consistent with OECD Guidelines
  • OECD recommendations re: treaty abuse / non-taxation to be incorporated into tax treaties
  • Draft OECD anti-hybrid rules to be implemented
  • Public Tax Transparency Code to supplement CbC reporting
  • Serious Financial Crime Taskforce to target serious financial crimes and tax evasion
  • Common Reporting Standard to be adopted from 1/1/2017
  • GST Compliance programme extended 3 years
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