Strategizing International Tax Best Practices – by Keith Brockman

Posts tagged ‘DST’

DST global summary

As the OECD is studying the Pillar One blueprint, and the UN is contemplating its own Digital Services Tax (DST) proposal, attached is a useful reference for unilateral DST initiatives.

France has also determined that it will collect its DST payments in December this year, notwithstanding trade/tariffimplications.

The DST regimes will, inexplicably, involve more complexity, differing tax systems globally and the possibility for more disputes to arise, although such disputes may hopefully have efficient arbitration remedies.

IRS guidance US Regs and UK DST

IRS issued new regulations for translation in Sec. 986(c)

The IRS also issued new LB&I guidance addressing computation of Sec. 986(c) computations, attached for reference.

US T.D. 9909, Final Regulations, in coordination with the issuance of proposed regulations, REG-124737-19, addressing Sec. 245A and the exception to subpart F income under Sec. 954(c)(6). The final regulations address extraordinary dispositions and reductions.

The UK will drop its Digital Service Tax (DST) initiative, knowing it would only increase its stimulus by several hundred million dollars , while COVID-19 has set the country back hundreds of billions of dollars in stimulus. It will be interesting how other countries, who have adopted or are thinking about a unilateral DST, will react prior to the OECD Project addressing this in Pillar One.

Austria: Digital tax 2020

Austria will welcome in the New Year with a 5% digital advertising tax and stricter governance rules.

EY’s Global Tax Alert provides details of this development.

Click to access 2019G_004459-19Gbl_Indirect_Austrian%20Gov%20approves%20digital%20advertising%20tax%20bill.pdf

French DST & Wine: US uncertainty

As the French digital services tax (DST) is in effect from 1/1/2019, with the first payment due in November, there is considerable uncertainty how this tax will be repealed/refunded when/if an OECD DST model takes its place.

The politicians see this as a potential remedy to put out the fire which started with implementation of this tax.  However, this issue becomes more complex from an international tax perspective as to how a refund/repeal would be treated: prospectively, retroactively, or some other method.

As this tax, similar to other provisions, was enacted unilaterally by the French administration anxious to improve their fisc, it is now shown to be disingenuous timing at the expense of multinationals which now have to pay this tax.  Hopefully, other countries do not follow this lead in advance of the OECD DST proposals.

Click to access 2019G_003927-19Gbl_Report%20on%20recent%20US%20international%20tax%20developments%20-%2029%20Aug%202019.pdf

New Zealand DST: In play

Not awaiting the OECD’s proposals for which a Workplace will be delivered in 2020, implementation following that several years later, New Zealand seeks to propose a 2-3% Digital Services Tax (DST) in the interim.  Public comments will be accepted by July 18th. The Government discussion document and EY’s Global Tax Alert provide details, as referenced herein.

Discussion document highlights:

The Government is committed to ensuring everyone pays their fair share of tax, including digital multinationals. Achieving this will require changes to the current tax rules. There are two options for this:

  • The first option is to apply a separate digital services tax (DST) to certain digital transactions. A DST taxes at a low rate (for example, 2% to 3%) the gross turnover of certain highly digitalised businesses that are attributable to the country.
  • The other option is to change the current international income tax rules, which have been agreed to by countries (usually referred to as “the international tax framework”).

In summary, New Zealand is not patient to wait for OECD rules, wishes to implement a transition tax in the interim and plans to repeal this tax with the OECD solution when it becomes effective.

Click to access 2019G_002780-19Gbl_Indirect_New%20Zealand%20considers%20Digital%20Services%20Tax.pdf

Click to access 2019-dd-digital-economy.pdf

UK Spring Statement: Pay your fair share

The UK Chancellor’s Spring Statement was announced on March 13, 2019 with a focus on the following:

  • Making Tax Digital, a light approach to penalties for companies striving to comply
  • Digital Services Tax; companies should pay their fair share (also a theme when the Diverted Profits Tax was announced)
  • Depreciation allowances
  • A policy paper re: HMRC’s approach to tax avoidance, evasion and other…

Additional consultations will follow, including the Digital Services Tax planned for April, 2020.

As the UK is still negotiating its entrance into, or exit from, Brexit, these developments will be especially important.

EY’s Global Tax Alert provides details for reference:

Click to access 2019G_000796-19Gbl_UK%20Chancellor%20announces%20Spring%20Statement.pdf

%d bloggers like this: