Worldwide Tax News
On 15 September 2015, the Inland Revenue Authority of Singapore published third editions of the following e-Tax Guides:
The General Guide for Businesses covers a number of GST related issues including the scope of GST, types of supplies, timing of supplies, claiming input tax, registration and deregistration, and others. The changes made in the third edition include revisions to the paragraph on voluntary registration and the paragraph on registration procedures.
The Do I need to Register? guide, provides an in-depth review of the registration requirements and determination of whether the requirements are met. As with the General Guide for Businesses, the changes made in the third edition include revisions to the paragraph on voluntary registration and the paragraph on registration procedures.
Australia Introduces Combating Multinational Tax Avoidance Bill including New Anti-Avoidance Rules and CbC Reporting
On 16 September 2015, Australia's Treasurer Joe Hockey presented to Parliament the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. The bill includes four main measures (schedules):
- The definition of significant global entities;
- The multinational anti-avoidance law;
- The scheme penalties for significant global entities; and
- Country-by-country (CbC) reporting
Significant Global Entities
The new anti-avoidance law, penalties and CbC reporting will apply to "significant global entities". Such entities are defined as those with annual global revenue of AUD 1 billion or more, or an entity that is a member of a group of entities that are consolidated for accounting purposes as a single group and the global parent entity of the group has annual global revenue of AUD1 billion or more.
If global financial statements have not been prepared showing that the threshold has been met, the ATO Commissioner may still make a determination that an entity is a significant global entity if the Commissioner reasonably believes, based on available information, that the threshold would be met had statements been prepared. If a determination is made, notice will be sent to the entity. Entities will generally have the right to file an objection to such determination.
Multinational Anti-Avoidance Law
The anti-avoidance law is targeted at multinationals that have entered into schemes to artificially avoid having a taxable presence in Australia. The law applies to foreign significant global entities involved in schemes where:
- The foreign entity derives income from making a supply to an Australian customer;
- Activities directly in connection with the supply are undertaken in Australia partly or fully by an Australian entity or permanent establishment of an entity that is an associate of or is commercially dependent on the foreign entity;
- The foreign entity avoids the attribution of some or all of the income to a permanent establishment in Australia; and
- It is reasonable to conclude that the purpose, or one of the main purposes, of the scheme was to enable one or more taxpayers involved in the scheme to obtain a tax benefit, or both to obtain a tax benefit and to reduce one or more of the relevant taxpayer’s liabilities to tax under a foreign law in connection with the scheme.
If it is determined that an arrangements is entered into for a principal purpose of avoiding tax, the Commissioner of Taxation has the power to look through the scheme and apply the tax rules as if the non-resident entity had been making a supply through an Australian permanent establishment.
The new law will apply to tax benefits obtained on or after 1 January 2016 in connection with a scheme, whether or not the scheme was entered into or was commenced to be carried out, before that date.
Scheme Penalties for Significant Global Entities
This measure includes the doubling of the penalties imposed for significant global entities that have entered into tax avoidance or profit shifting schemes. The increased penalties will not apply for taxpayers that adopt a reasonably arguable tax position.
The penalties, based on the relevant scheme shortfall amount, are as follows:
- Base penalty amount - 100%
- Aggravating factors apply - 120%
- Disclosure during examination - 80%
- Disclosure before examination - 20%
- Base penalty amount - 50%
- Aggravating factors apply - 60%
- Disclosure during examination - 40%
- Disclosure before examination - 10%
The increased penalties will apply for scheme benefits obtained, or that would be obtained, in relation to any income year commencing on or after 1 July 2015, regardless of when the scheme was entered into or commenced to be carried out.
Country-by-Country (CbC) Reporting
For tax years beginning on or after 1 January 2016, entities deemed as significant global entities in the income year preceding the income year reported on will be required to provide transfer pricing statements in an approved form to the Australian Taxation Office (ATO) Commissioner. The required statements and content are based on the OECD guidelines developed as part of Action 13 of the BEPS Project, and include:
- A master file - providing an overview of the multinational enterprise group business, including the nature of its global business operations, its overall transfer pricing policies, and its global allocation of income and economic activity;
- A local file - focusing on specific transactions between the reporting entity and its associated enterprises in other countries, as well as the amounts involved in those transactions, and the entity’s analysis of the transfer pricing determinations that it has made; and
- A CbC report - containing certain information relating to the global allocation of the multinational enterprise’s income and taxes paid together with certain indicators of the location of economic activity within the multinational enterprise group.
The exact content of the statements, however, is not yet finalized by the ATO.
It is envisaged that the approved forms will include materiality thresholds in relation to reportable transactions. Factors the Commissioner may take into account when determining materiality could include:
- The size and nature of the transaction;
- Whether the transaction is the subject of an existing administrative safe harbor; and
- Whether the transactions are the subject of other administrative arrangements such as Advance Pricing Arrangements and Advance Compliance Arrangements.
The requirements will apply to Australian resident entities and foreign entities with a permanent establishment (PE) in Australia if meeting the definition of significant global entities. However, the ATO will have broad powers to provide an exemption from filing one or more of the statements. Factors the ATO will consider for exemptions include:
- The risk profile of the local entity, including for example the amount of its overseas dealings;
- The compliance burden imposed on the entity; and
- Whether the Commissioner will receive the relevant statement or statements by alternative means.
In particular, an Australian entity or PE will not be required to provide a CbC report if the report is provided to the ATO by the jurisdiction of the global parent entity, and will not have to provide the master file if is submitted by another member of the group resident in Australia. In addition, entities consolidated for Australian tax purposes need only report as a single entity.
The submission deadline is within 12 months following the end of the relevant income year. Submissions may also be allowed at the time the relevant tax return is filed and a deferral may be available if approved by the ATO.
Click the following links for the Treasurer media release, the Explanatory Memorandum, and the full text of the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015.
On 14 September 2015, Brazil's Minister of Finance and Minister of Planning, Budget and Management announced proposed tax measures to increase revenue. The measures include:
- Replacing the flat individual capital gains tax rate of 15% with progressive rates ranging from 10% up to 30%;
- Reinstating the bank transactions tax (CPMF) at a rate of 0.20% on any debit in a bank account for four years;
- Reducing the maximum tax relief (refund) under the REINTEGRA regime for exports to the lowest rate of 0.10% of gross export income in 2016, 1% in 2017, 2% in 2018 and 3% in 2019 (currently refund rates range from 0.10% to 3% depending on the type of goods);
- Limiting the interest on equity capital (JCP) deduction to 5% of net equity; and
- Eliminating the reduced contribution rates for the Program for Social Integration (PIS) and the Financing of Social Security (COFINS) for certain chemicals, with a 50% reduced benefit in 2016 and fully eliminated in 2017.
The measures will be presented in legislation to Congress for approval. However, certain measures may be introduced through provisional measures, which are generally enacted once published but must be approved or extended by Congress within 60 days to remain so.
According to recent reports, officials from Austria and Brazil are meeting 14-18 September 2015 in order to complete negotiations for a social security agreement. The agreement will be the first of its kind between the two countries, and must finalized, signed and ratified before entering into force.
On 11 September 2015, Spain's Council of Ministry approved for ratification the pending protocol to the 1995 income and capital tax treaty with Belgium. The protocol, signed 15 April 2014, amends the competent authority in the case of Belgium and replaces paragraph 1 of Article 26 (Exchange of Information). It is the third protocol signed, although the second protocol signed in 2009 has not entered into force.
The 2014 protocol will enter into force once the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force.