Worldwide Tax News
As part of its third bailout program, Greece has repealed article 21 of Law 4321/2015 with retroactive effect, which had been enacted earlier in the year and introduced a 26% withholding tax on certain cross border transactions (previous coverage). The tax, introduced in March 2015, was a prepayment of tax for the payer, and if not made, rendered the expense non-deductible.
It was to apply in a number of cases, including for payments to residents of non-cooperative jurisdictions and residents of jurisdictions with a beneficial tax regime, i.e. a tax rate less than half of the Greek 26% tax rate. However, the tax proved controversial and found to be inconsistent with EU law in a reasoned opinion issued by the EU Commission following the filing of a complaint by Bulgaria (tax rate 10%). As a result, its repeal was included in the conditions of the recent Greek bailout agreement.
On 18 August 2015, the Economics References Committee of the Australian Senate issued an interim report on the Senate Inquiry into issues of corporate tax avoidance and aggressive minimization. The report was drafted after receiving 121 submissions and holding six public hearings on the issues and provides recommendations concerning four main areas:
- Evidence of tax avoidance and aggressive minimization;
- Multilateral efforts to combat tax avoidance and aggressive minimization;
- Potential areas of unilateral action to protect Australia's revenue base; and
- The capacity of Australian government agencies to collect corporate taxes
The 17 recommendations included in the interim report are as follows:
Evidence of tax avoidance and aggressive minimization
The committee recommends that the Australian Government work with governments of countries with significant marketing hub activity to improve the transparency of information regarding taxation, monetary flows and inter-related party dealings.
Multilateral efforts to combat tax avoidance and aggressive minimization
The committee recommends that the Australian Government continue to take a leadership role in finalizing and implementing the efforts of the OECD in addressing problems associated with base erosion and profit shifting. However, the committee also considers that international collaboration should not prevent the Australian Government from taking unilateral action.
Potential areas of unilateral action to protect Australia's revenue base
The committee recommends that a mandatory tax reporting code be implemented as soon as practicable but no later than the current timeframe for the proposed voluntary public transparency code. Any Australian corporation or subsidiary of a multinational corporation with an annual turnover above an agreed figure would be required to publicly report financial information on revenue, expenses, tax paid and tax benefits/deductions from specific government incentives, such as fuel rebates and research and development offsets.
The committee recommends maintaining existing tax transparency laws which apply to both private and public companies.
The committee recommends establishing a public register of tax avoidance settlements reached with the Australian Taxation Office (ATO) where the value of that settlement is over an agreed threshold.
The committee recommends that the government consider publishing excerpts from the Country-by-Country reports, and suggests that the government consider implementing Country-by-Country reporting based closely on the European Union's standards.
The committee recommends that the ATO, in conjunction with Treasury and other relevant agencies, provide an annual public report on aggressive tax minimization and avoidance activities to be tabled in Parliament. This report could include estimations of forgone revenue, evaluate the effectiveness of policy and propose potential changes.
The committee recommends that the Australian Government tender process require all companies to state their country of domicile for tax purposes.
The committee recommends mandatory notification by agencies to the relevant portfolio Minister when contracts with a dollar value above an agreed threshold are awarded to companies domiciled offshore for tax purposes.
The capacity of Australian government agencies to collect corporate taxes
The committee recommends an independent audit of ATO resourcing, funding and staffing.
The committee recommends the ATO report to parliament, at least annually on:
- The number of audits or disputes launched concerning multinational corporations;
- The number of cases settled with multinational corporations;
- The number of successful legal proceedings concluded against multinational corporations; and
- The staff resources allocated to tax compliance of multinational corporations.
The committee recommends that taxation legislation be amended so that non-reporting entities are required to disclose related party information in financial reports under the Corporations Act if notified to do so by the ATO.
The committee recommends that the concept of 'grandfathered large proprietary companies' be removed from the Corporations Act, and these companies be required to lodge financial reports with the Australian Securities and Investments Commission (ASIC).
The committee recommends that all proprietary companies are required to review and confirm their size with ASIC annually.
The committee recommends that the confidentiality provisions in section 127 of the ASIC Act be amended to allow ASIC to share information with the ATO without having to notify the affected person.
The committee recommends that people who propose to become directors of companies be required to provide evidence of their identity to the ASIC.
The committee recommends that ASIC amend Class Order 98/98 so that a company is not eligible for financial reporting relief, where the ATO notifies the company and ASIC that the relief does not apply to that company.
Click the following link for the full 112-Page Corporate tax avoidance report Part 1: You cannot tax what you cannot see.
Under the 2015 Tax Revision Bill, Korea is planning to implement new transfer pricing reporting requirements for multinational enterprises, including a new report on international transactions. The contents of the report are based on the guidelines developed as part of Action 13 of the OECD BEPS Project, and include:
- A Local File - including details of related party transactions the local entity taxpayer is involved in; and
- A Master File - including the structure of the taxpayers group, location of subsidiaries, top 5 revenue sources of the group comprising at least 5% of total revenue, description of organizational restructuring during the year concerned, etc.
The new requirements are to apply for Korean resident companies and permanent establishments of foreign companies meeting certain transaction thresholds (TBD) for tax years beginning on or after 1 January 2016. The due date for the report will be the same as the annual tax return (generally three months following the year-end, four if filing a consolidated return).
One of the key components of the Action 13 guidelines, the country-by-country (CbC) report, is not included in the current transfer pricing report proposal. The Korean Ministry of Strategy and Finance has reportedly decided to implement the CbC requirement after the Master and Local File requirements in order to alleviate the increased compliance burden multinationals will face.
New Zealand Launches Consultation on the Collection of GST on Online Purchases of Services and Intangibles Supplied by Non-Residents
On 18 August 2015, the New Zealand government issued a discussion document for public comment on the collection of GST on online purchases of services and intangibles supplied by non-residents. Currently, the online purchase of services and intangibles are not within the scope of GST.
The discussion document includes the following approach and requests for comment:
- It is proposed that services and intangibles supplied remotely by an offshore supplier to New Zealand-resident consumers will be treated as performed in New Zealand and therefore subject to GST.
- Offshore suppliers will be required to register and return GST if their supplies of services to New Zealand-resident consumers exceed a given threshold in a 12-month period. Submissions are sought on the value of that threshold.
- A wide definition of “services” is proposed, which includes both digital services and more traditional services.
- In some situations, an electronic marketplace or intermediary may be required to register instead of the principal offshore supplier.
- While GST is about taxing business-to-consumer supplies, submissions are sought on whether offshore suppliers should be required to return GST when they supply services and intangibles remotely to New Zealand GST-registered businesses (which would normally be able to claim the GST back) and whether these services would count towards the registration threshold.
- Offshore suppliers would be able to rely on certain objective proxies in order to determine whether a customer is a New Zealand resident.
- If supplies to New Zealand-registered businesses are excluded, New Zealand businesses would be required to identify themselves as a business by providing their IRD number to the offshore supplier when acquiring services that would otherwise be covered by the rules.
- If business-to-business supplies are excluded, the existing reverse charge rule would apply to GST-registered businesses that receive services and intangibles from offshore suppliers when the services and intangibles relate to non-taxable activities.
- Again, if business-to-business supplies are excluded and a person misrepresented themselves as a business to avoid being charged GST, the existing “knowledge” offences may apply and, if applicable for more egregious cases, the Commissioner of Inland Revenue would have the discretion to register the person for GST and require the GST to be paid.
- The following three registration systems for offshore suppliers are being considered:
- The domestic registration system;
- A “pay only” registration system; or
- A regional “one-stop-shop” registration system.
- It is proposed that the new rules would be included in the next omnibus tax bill.
The discussion document also covers issues regarding low-value imported goods supplied by non-residents. No specific proposals are included in the discussion document, but it serves as a starting point to review the collection of GST on imported goods, and a paper specifically focused on their taxation is expected later in the year.
Click the following links for the GST: Cross-border services, intangibles and goods discussion document, including instructions for submitting comments, which are due by 25 September 2015.
During a meeting held 18 August 2015, officials from Brazil and Germany agreed to begin negotiations for a new tax treaty. The treaty will replace the 1975 income and capital tax treaty between the two countries, which was terminated effective 1 January 2006. It must be finalized, signed and ratified before entering into force.