Presentation Tax update_Mazars
With the Swiss Federal Council giving the Swiss delegation to the OECD the go ahead to accept the final BEPS report due towards the end of September means that Switzerland will implement and apply the new standards in the near future. It is now definitely no longer a question whether or not, but only when and how BEPS will become true!
While many countries in the OECD (but also emerging and developing countries) are waiting for the final reports on the 15 comprehensive actions of the BEPS project, the Swiss Federal Council gave the Swiss delegation the green light to approve the BEPS final reports at OECD level a few days ago.
Agreeing to the actions and BEPS means that Switzerland will implement the new standards and apply these in the near future. Application will require acceptance of several multilateral competent authority agreements (MCAA), e.g. for the exchange of Country-by-Country Reports (CbCR) as well as the integration of the standards into newly negotiated double tax treaties.
Quite some uncertainty whether certain actions are relevant, which previously may have overshadowed business executed from Switzerland, has been eliminated – what still remains a bit unclear is the date as to when BEPS will kick in.
However, one thing that seems fairly clear is that the CbCRs are likely to become applicable at least one year later than initially discussed. Hence facts, (figures) and circumstances of financial years starting on or after 1 January 2016 will not yet be subject to a first report but only those of 2017 will likely see a first real application of CbCR. This gives companies and also the competent authorities a bit of time to implement a proper reporting.
We will stay tuned and update you on the final reports in due course here as well as with KPMG Webcasts.
12 October 2015
In order to help you stay informed and ahead of the curve on preparing for the potential tax landscape changes, we have summarized below some of the most important tax developments that have happened since the release of our last newsletter, i.e. between July and 12 October, at the OECD, EU or country level, in the area of tax transparency and the fight against tax avoidance
OECD BEPS Action Plan – Release of the final deliverables
On 5 October 2015, the OECD released the final package of measures for a coordinated international approach to the reform of the international tax system under the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project. For the majority of BEPS actions, these documents mark the end of the discussion and recommendation phase, and the start of the implementation and practical delivery phase.
All 13 reports, together with a plan for the follow-up work and a timetable for their implementation, were presented at the G20 Finance Ministers’ meeting on 8 October 2015 in Lima. The G20 Finance Ministers endorsed the final package of BEPS measures and renewed a commitment for rapid, widespread and consistent implementation of the measures. The package will now be submitted to the G20 Leaders for discussion and action at their meeting on 15-16 November 2015 in Antalya.
Below we have listed the 15 different actions of the BEPS Action Plan. Click on each of the actions to visit the corresponding report on the OECD website.
15 Actions of the BEPS Action Plan
- Action 1 – Address the tax challenges of the digital economy
- Action 2 – Neutralise the effects of hybrid mismatch arrangements
- Action 3 – Strengthen CFC rules
- Action 4 – Limit base erosion via interest deductions and other financial payments
- Action 5 – Counter harmful tax practices more effectively, taking into account transparency and substance
- Action 6 – Prevent treaty abuse
- Action 7 – Prevent the artificial avoidance of PE status
- Actions 8, 9 and 10 – Assure that transfer pricing outcomes are in line with value creation
- Action 11 – Establish methodologies to collect and analyse data on BEPS and the actions to address it
- Action 12 – Require taxpayers to disclose their aggressive tax planning arrangements
- Action 13 – Re-examine transfer pricing documentation
- Action 14 – Make dispute resolution mechanisms more effective
- Action 15 – Develop a multilateral instrument
First reactions
To help you start assessing the potential BEPS impacts, read the KPMG action-by-action observations.
G20 calls for a global forum to implement the BEPS Action Plan
For the BEPS implementation phase, following the G20 and OECD call for increased inclusiveness, a new framework for monitoring BEPS will be created, with all interested countries, including countries outside the G20, particularly developing economies, participating on an equal footing.
The OECD will present a plan for the creation of such a body for implementing BEPS at the G20 Finance Ministers’ meeting in February 2016.
BEPS measures – Local implementation phase: watch out!
BEPS Action 13 – Transfer Pricing Documentation and Country-by-Country Reporting
Several countries, listed below, recently indicated that they envisage implementing or have implemented Country-by-Country (CbC) reporting and other transfer pricing disclosure requirements based on Action 13 of the BEPS Action Plan.
| France |
France has been waiting for the release of the final BEPS reports before implementing CbC reporting and has now officially announced to issue draft legislation in this respect before year end. |
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UK |
On 5 October 2015, the HM Revenue & Customs initiated a technical consultation on CbC reporting which will be opened until mid-November. |
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Denmark |
The Danish government issued on 18 September 2015 a legislative proposal to provide measures that would enhance the Danish transfer pricing documentation requirements and include CbC reporting, all of which is generally in line with the OECD model. |
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Australia |
A “country-by-country” bill was introduced into Parliament on 16 September 2015 as part of a larger package of legislation, the Combating Multinational Tax Avoidance Bill 2015. |
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The Netherlands |
The Dutch government presented on 15 September 2015 its main plans for 2016 which include CbC reporting and more stringent documentation requirements under the form of a master file and a local file, in line with the OECD model, with stricter filing deadlines than currently is the case. |
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Poland |
Poland’s lower house on 11 September 2015 passed a bill containing amendments to the tax laws, including changes to the transfer pricing rules and introducing CbC reporting, local, and master file requirements. |
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Mexico |
In the Mexican government’s 2016 federal budget, presented on 8 September 2015, there are proposals that would expand the transfer pricing documentation requirements under the form of a master file and a local file, and introduce CbC reporting. |
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South Korea |
South Korea’s Ministry of Strategy and Finance released on 6 August 2015 draft legislation that would require taxpayers, subject to the Korean transfer pricing rules, to submit both a master file and a local file containing information on related-party transactions. Although CbC reporting is currently not part of the draft legislation, it can be anticipated that CbC could eventually be adopted in Korea once other countries, especially certain trading partners, would do so. |
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Spain |
Multinational corporations, foreign-owned Spanish subsidiaries, and permanent establishments will be subject to stricter reporting requirements in Spain following the entry into force in July of a decree outlining requirements to provide country-by country reports of a group’s entire worldwide activities and other transfer pricing documentation under the form of a master file and a local file to the Spanish tax authorities. More information can be found in our previous BEPS newsletter. |
Switzerland / BEPS “go ahead”
The Swiss Federal Council has given the Swiss delegation to the OECD the “go ahead” to accept the final BEPS reports.
This action indicates that Switzerland could implement and apply the new standards in the near future, although the timing remains uncertain. For CbC reporting, however, it is expected to cover 2017 as its first year, i.e. one year later than initially discussed.
Multinationals are divided as to whether the base erosion and profit shifting (BEPS) project will create a more sustainable global tax system.
According to the annual global survey of multinational CFOs, conducted by tax adviser network Taxand, 52% of multinationals agree that the Organisation for Economic Co-operation and Development’s (OECD’s) initiative will meet its objectives, while 48% disagree.
Base erosion and profit shifting is a term that is used to describe tax-planning strategies that exploit gaps and mismatches in tax rules to make profits disappear for tax purposes or to shift profits to low-tax locations.
The aim of BEPS is to eliminate base erosion and profit shifting by giving countries the tools they need to ensure that profits are taxed where the economic activities that generate those profits are performed. It will also give greater certainty to businesses by reducing disputes over the application of international tax rules.
Multinationals are already witnessing the impact of BEPS as governments and authorities drive an aggressive approach to stamping out tax-avoidance loopholes and expose the tax affairs of corporates through greater transparency and across the media.
While the OECD aims to achieve more sustainable global tax landscape, the lack of clarity on key issues will mean further confusion for multinationals on how they should implement BEPS from an operational point of view. The survey found that while 80% thought tax initiatives to fundamentally reform the international tax architecture are desirable, just 55% think it is achievable.
The BEPS initiative will require close international cooperation, transparency, data and reporting requirements from all countries and multinationals. Survey respondents felt that it will have a material financial and operational impact, with 83% globally believing that enhancing global tax transparency will increase the cost of compliance.
Despite the increase in the administrative burden, the lack of clarity on who will have access to information, and the potential for misinterpretation of the data supplied, 57% of global respondents were in favour of the BEPS proposal of reporting country-by-country profits.
There is a downside to this approach, however, since 83% of respondents believed that tax competition will increase over next five years.
Frederic Donnedieu, chairman of Taxand, said: “Multinationals are facing a new frontier where the landscape is uncertain.”