Bulletin 8

Printable Version

Malta Proposes Stricter Rules for Arbitrators of EU Tax Disputes

Malta, in its role as rotating president of the European Union, is proposing changes to the pending EU Double Taxation Dispute Resolution Mechanisms Directive that would require arbitrators of tax disputes to be certified judges and eliminate references to the OECD multilateral instrument and the OECD Model Tax Convention. The Maltese presidency also has a new list of definitions, including for permanent establishments, in response to calls for the expansion of the scope of the directive to cover more than just business taxation and disputes involving countries with bilateral tax treaties.

EU: Battle Over New Anti-Money Laundering Law Enters Final Phase

EU member countries and the bloc’s Parliament faced off on final terms for amending the EU Anti-Money Laundering Directive, a day after a report alleged that more than $20 billion from Russia was laundered through anonymous shell companies between 2010 and 2014.

The debate revolves around the European Union’s commitment, made in the wake of year-old Panama Papers revelations, to crack down on shell companies and trusts, with member countries and the central government seeking common ground on key issues concerning company beneficial owner transparency rules and mandatory public registries of trusts accounts.

AUSTRALIA: Diverted profits tax to take effect on 1 July 2017

Australia’s parliament has passed legislation to implement the government’s diverted profits tax, intended to prevent multinationals’ profits made in Australia being shifted offshore to avoid paying tax. The 40 per cent levy will take effect on 1 July 2017 for multinationals that have a global income of more than AUD1 billion and an Australian income of more than AUD25 million, and is expected to raise AUD100 million in annual revenue over 2018-2019.

IRELAND: Country has been accused of rivalling the Cayman Islands when it comes to tax avoidance

Ireland has been accused of potentially allowing the world’s biggest banks to dodge hundreds of millions of euro in corporate tax. A new report from Oxfam has shown that Europe’s top banks registered a combined €2.3 billion in profits in Ireland from a total turnover of €3 billion in 2015.

The research, which was also carried out by the Fair Finance Guide International, examined filings made under new EU transparency rules for the top 20 banks in Europe – 16 of which have a presence in Ireland. The report showed that the banks paid an average effective tax rate in Ireland of no more than 6% – less than half the statutory rate of 12.5%.

The research showed that three banks – Barclays, RBS and Crédit Agricole – paid less than 2%. The effective tax rate was calculated using the standard formula of dividing the tax paid on profits by the total reported pre-tax profits.

FRANCE: Non-EU nationals must pay social charges on French investment income

The French Constitutional Court has ruled that the French government is entitled to impose social charges on the property and investment income of non-EU nationals even if they are not affiliated to the French health system. A similar charge imposed on nationals of other European Union member states was ruled, in 2015, to be in breach of EU law on discrimination grounds, but the court has now decided that it is not illegal to discriminate against nationals of countries out of the EU.

BRAZIL: Tax amnesty re-opened

Brazil’s tax amnesty (‘Special Regime for Tax and Exchange Legalisation’ or RERCT) has been reopened. Undeclared assets must now be disclosed by the new deadline of 31 July 2017, and the penalties have been increased from 30 per cent to 35.25 per cent. The first phase of the amnesty, launched in 2016, brought in extra tax revenues of over BRL45 billion (USD14 billion).side the EEA.

OECD issues new tax guidance for automatic exchange of financial account information

The Organisation for Economic Development and Co-operation (OECD) has published the second edition of the Standard for Automatic Exchange of Financial Account Information in Tax Matters to further support the consistent implementation of the Common Reporting Standard (CRS).

It also sets out additional technical guidance on the handling of corrections and cancellations within the CRS XML Schema, as well as a revised and expanded set of correction examples. A set of FAQs has also been published.

ARGENTINA: Citizens declared USD116 billion in tax amnesty

Argentina’s successful tax amnesty, which ended on 31 March 2017, collected USD116 billion in previously undisclosed assets, of which USD93.3 billion were previously held, undeclared, outside the country – 30 per cent of the disclosed offshore investments were located in the United States, 26 per cent in Switzerland, and 15 per cent in the British Virgin Islands. The amnesty’s revenue represents 21 per cent of Argentina’s GDP. This amnesty was a game changer. Its success must be compared with the 2013-2015 amnesty, which collected USD2.6 billion, and the 2004 amnesty, which collected USD4.7 billion.

AUTOMATIC EXCHANGE OF INFORMATION: OECD releases second edition of CRS guidance

The OECD has updated its Q&A document that answers questions, from businesses and government delegates, on the implementation of the common reporting standard (CRS). The OECD has also published the second edition of the Standard for Automatic Exchange of Financial Information in Tax Matters, which expands the last part on the CRS XML Schema User Guide.

GREECE: Prosecutors ask Panama for bank account data of Greek citizens listed in Mossack Fonseca leak

Greek public prosecutors have asked the Panamanian authorities to hand over information on the bank accounts of Greek residents listed in the April 2016 Mossack Fonseca data leak. Panama says it can assist only with investigations relating to suspected corruption of state officials, not tax evasion.

Malta: EU Tax Reform Must Give Companies Investment Certainty

European Union presidency holder Malta rejected claims it is trying to slow efforts to clamp down on multinational company tax avoidance by raising concerns about the pace of reforms, but insisted companies have the right to tax certainty when making investments, reports BNA.

At the same time, EU member states led by Ireland complained that they are being forced to serve “two masters” in complying with EU tax reforms that sometimes diverge from reforms adopted by the Organization for Economic Cooperation and Development (OECD). These include pending EU proposals calling for country-by-country tax and profit reporting, as well as a common consolidated corporate tax base.

Facing criticism over a paper, “ Tax Certainty in a Changing Environment,” presented April 7-8 at an EU finance ministers meeting in the Maltese capital of Valletta, Malta Finance Minister Edward Scicluna countered by citing the presidency’s recent legislative achievements. “Good taxation contributes to tax certainty,” Scicluna said. “Because the end game is that companies need to know the future.They are investing today—parting with their money today. They want to know with certainty what the future holds when it comes to taxation.”

CORPORATE TAXATION: New OECD guidance on implementation of country-by-country reporting

The OECD has released updated consolidated guidance on the implementation of country-by-country (CbC) reporting under Action 13 of the G20/OECD’s Base Erosion and Profit Shifting (BEPS) action plan. The updated guidance addresses five new specific issues, including the definition of revenues; the accounting principles and standards for determining the existence of, and membership in, a group; the definition of ‘total consolidated group revenue’; the treatment of major shareholdings where minority interests are held by unrelated parties; and the definition of ‘related party’.

GERMANY: Company ownership register to be fully open to public

More detail is now available on the German Finance Ministry’s anti-evasion strategy, which will include creation of a global blacklist of non-cooperative jurisdictions; mandatory disclosure of tax avoidance schemes; a company beneficial ownership register that will be open to the public; stronger penalties for breaches of corporate law; an extended statute of limitations for tax evasion; and more stringent national anti-money laundering laws.

EUROPEAN UNION: Finance ministers recognise need for tax certainty

Under pressure from the OECD, the EU’s Council of Finance Ministers has taken up the idea of ‘tax certainty’ so that multinationals can be sure, in advance, how their EU investments will be treated. At a minimum, companies must know that they have access to a dispute resolution mechanism to resolve instances of double taxation. However the initiative will not interfere with the EU’s drive against corporate tax avoidance, ECOFIN president Edward Scicluna said after a recent ECOFIN meeting.

Sources: STEP | IFC Review

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