Strategizing Multinational Tax Risks

BEPS related developments

EY’s Global Alert highlights several OECD / unilateral actions resulting from the BEPS Action Items announced earlier this month.

Click to access 2015G_CM5827_The%20Latest%20on%20BEPS%20-%2026%20October%202015.pdf

Highlights:

• Czech Republic’s 2016’s income tax proposal, including the EU Parent-Subsidiary Directive change limiting exemption of tax deductible distributions, although retaining its own general anti-abuse rule (vs. that in the Directive).
• EU’s State Aid decisions re: Luxembourg and Netherlands, for which legal appeals are expected.
• Honduras transfer pricing information return requirement.
• Indonesian thin capitalization limit of 4:1, remainder of interest non-deductible (thereby incurring one-sided taxation re: interest income of recipient).
• Ireland’s Knowledge Development Box, following the OECD’s recommendations, and country-by-country (CbC) reporting by Irish headquartered groups with a secondary filing mechanism.
• Norway’s 2016 budget proposal, with an interest limitation of 25% of taxable EBITDA.
• Slovakia’s 2016 income tax changes, including implementation of the EU Parent-Subsidiary Directive.

This new post-BEPS period is starting off with a multitude of activities by countries and the EU that is not expected to slow down in the near future.  These developments will shape the transfer pricing regime, and resulting complexity and disparity, around the world.  Accordingly, these trends should be monitored and addressed in a corporation’s tax risk framework accordingly.