Strategizing International Tax Best Practices – by Keith Brockman

Posts tagged ‘Taiwan’

Taiwan TP: Master File

Taiwan’s new transfer pricing (TP) guidance encompasses the local file, country-by-country (CbC) report and the Master File, effective for the 2017 tax year.

Inclusion of the TP Master File as a required document to be submitted annually is a new trend, apart from having it available upon audit.  Although generally protected by a tax administration’s confidentiality provisions, increasing circulation around the world increases the chances of a leak, inadvertent or otherwise.

Thus, it would be prudent to consider such information as being in the public domain when finalizing this report for distribution. 

https://home.kpmg.com/content/dam/kpmg/tw/pdf/2017/11/tw-e-tax-alert-issue100-eng.pdf

Taiwan’s new rules: CFC/Place of effective management

Taiwan’s recent amendments to its Income Tax Act provides rules for determination re: Controlled Foreign Corporations (CFC’s) and, most importantly, guidelines for determination of a company’s place of effective management (PEM) in Taiwan.

The PEM rules are becoming more important as MNE’s are arranging board meetings and making strategic directions in locations around the world, and not restricted to an entity’s country of incorporation.  Not restricted to Taiwan, PEM rules should be a strategic focus as its importance is significant, with similar rules being enacted in other countries.  

All MNE’s conducting business in Taiwan should be knowledgeable about these changes going forward, and planning accordingly.

EY’s Global Alert provides details of this development.

http://www.ey.com/Publication/vwLUAssets/Taiwan_issues_final_regulations_on_controlled_foreign_company_rules_and_place_of_effective_management/$FILE/2016G_02129-161Gbl_TW%20issues%20final%20regs%20on%20cfc%20rules%20and%20place%20of%20effective%20mgmt.pdf

BEPS update; no slowing down

The drive for additional transparency, among efforts by countries to implement anti-avoidance rules that trump tax treaties, continues with the latest round of BEPS updates, as EY’s Global Tax Alert provides added insight:

http://www.ey.com/Publication/vwLUAssets/The_Latest_on_BEPS_-_9_May_2016/$FILE/2016G_00921-161Gbl_The%20Latest%20on%20BEPS%20–%209%20May%202016.pdf

Highlights:

  •  Australian Tax Office (ATO) release of 4 tax alerts for issues of concern, a Diverted Profits Tax (DPT) is to be implemented, hybrid mismatch arrangements will be addressed in legislation, and the effective date for the new/revised OECD’s arms-length principle standards will move forward to 1 July, 2016.
  • Ecuador: the most recently version, as of 1/1 of a taxpayer’s year, of the OECD’s Guidelines will be used as transfer pricing reference absent domestic rules.
  • Hungary: A “modified nexus” IP approach will come into force.
  • Netherlands: The innovation box rules will be amended to comply with OECD’s Action 5 guidelines.
  • New Zealand: Domestic anti-avoidance rules will trump double treaty arrangements.
  • Taiwan: CFC rules will be promulgated.  
  • Turkey: An “electronic place of business” draft legislation would empower taxation.
  • Ukraine: A working group is forming anti-BEPS measures for consideration.
  • US: Treasury is trying to extricate itself from its 1-year lag in obligatory country-by-country (CbC) reporting, although global acceptance is not expected.

The impact of BEPS is still accelerating, although the efforts by countries to avoid treaty provisions will provoke additional disputes and double taxation.  Accordingly, the veil of anti-BEPS legislative efforts overshadows mutual transparency and collecting a fair share of tax while avoiding double taxation.  Thus, all multinationals should be extra vigilant in the new era of international tax for additional documentation and support for significant transactions with low-tax countries.

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