Strategizing International Tax Best Practices – by Keith Brockman

Posts tagged ‘country by country report’

European Parliament 24-0 vote for public disclosure: CbC & Beneficial Ownership

The European Parliament recently voted unanimously for public disclosure rules to fight tax evasion, tax avoidance and establishing fair, well-balanced, efficient and transparent tax systems.  A copy of the press release is provided for reference:

http://www.europarl.europa.eu/news/en/news-room/content/20150601IPR61336/html/Development-MEPs-call-for-action-to-target-tax-evasion-in-developing-countries

Summary:

  • All countries to adopt country-by-country (CbC) reporting, with all information available to the public
  • Beneficial ownership information to be made publicly available
  • Call for coordination to combat tax evasion and avoidance by the European Investment Bank, European Bank for Reconstruction and Development and EU financial institutions.
  • Request to the Commission for an ambitious action plan, without delay

The outcry for public reporting, currently underway by the OECD, European Parliament and European Commission is increasing exponentially within Europe.  Other countries will obviously follow the EU approach, with perceptions of complicated international tax rules increasing disparity between application of the transfer pricing arm’s length principle.

The CbC reporting, and beneficial ownership detail, should be expected to be in the public domain if this trend continues.  Currently, it is a sign of an incoming tsunami that cannot be completely avoided.

 

Category:

OECD / UN, Transfer Pricing

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Poland’s new TP legislation, with CbC reporting

The referenced KPMG transfer pricing (TP) Alert provides details into the forthcoming sweep of new legislation expected to effective for 2016.  This is a major reform of its domestic legislation which is inclusive of BEPS TP discussion draft intentions, including submission of a country-by-country report (CbC), due one year after a company’s year-end, for for taxpayers with consolidated revenue exceeding EUR 750M.

Click to access poland-may27-2015.pdf

Key observations:

  • The CbC report appears to be applicable for companies exceeding the EUR 750M threshold, regardless of the parent’s place of incorporation.  Thus, this legislation does not rely on the exchange of information to receive this data.
  • Entities with revenues or expenses between EUR 2-10M will be required to produced only a local file, although such file is inclusive of the new BEPS items including organizational structure and restructurings.
  • Medium taxpayers (revenues or expenses exceeding EUR 10M) are required to submit local based comparable analysis.
  • Large taxpayers also have a CbC reporting requirement.  
  • TP documentation is a “contemporaneous” requirement by the due date of the tax return.
  • A Board member will be required to sign a statement confirming preparation of the “contemporaneous” documentation by the deadline.  This applies to all small, medium and large taxpayers.
  •  The 50% tax rate (i.e. penalty provision) to adjusted income is unchanged.

Although expected to become effective commencing in 2016, it is critical to monitor this date to the extent it would be earlier, as it would form a new deadline date for CbC reporting apart from the OECD draft guidelines.  Additionally, the local comparable requirement (similar to Russia) imposes additional cost and complexity for Poland’s new era of TP legislation.

Category:

Transfer Pricing

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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:

http://www.budget.gov.au/2015-16/content/glossy/tax/html/tax-05.htm

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

Category:

OECD / UN, Transfer Pricing

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European Commission: Transparency blueprint

Commissioner Moscovici’s recent speech addressing the future of tax policy aims at developing an ambitious blueprint for taxation in Europe.  A link to his speech is provided for reference:

http://europa.eu/rapid/press-release_SPEECH-15-4900_en.htm

Key comments:

  • Enhanced EU transparency in tax matters
  • Coordination of Member States tax systems
  • Cooperation between Member States, exemplified by EU Tax Transparency Package initiative (refer to 22 March 2015 post)
  • Full transparency cost/benefit assessment re: Country-by-Country reporting for public disclosure
  • New Action plan before summer (an issue that is fundamental to the EU) building on global developments
  • Assess relaunch of Common Consolidated Corporate tax base (CCCTB)

The European Commission is accelerating its efforts, resulting in a potentially different documentation framework than the OECD Guidelines may suggest and/or a basis that the rest of world will follow.  The Commission has the necessary momentum and political cohesiveness to achieve its efforts for the EU, although with a possible demarcation with the rest of the world.

CbC reporting by MNE’s continues its actions on center stage as MNE’s should plan for (if they have not already) public disclosure of such reporting.  Thereby, the topics of supplemental reporting (i.e. indirect tax contributions, etc.) become more important for senior leaders to consider.  Finally, such disclosure warrants a seamless governance process and alignment for addressing future questions by interested parties.

Category:

Transfer Pricing

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