Current Status of Country by Country Reporting Tax
Current Status of Country by Country Reporting Tax and Technology Conference: Vienna 9 -10 February, 2016 Jeffrey Owens, Director of the WU Global Tax Policy Center Vienna, February 9 – 10, 2016
BEPS action plan: A Recap 2 Endorsed by G 20 Heads of State in November 2015
Tax transparency: an overview Exchange of Information (Eol) Enablement from international DTTs/TIEAs FATCA/OECD Common Reporting Standard (CRS) Tax transparency organisations Anti-Money Laundering (AML) standards 3 EU tax transparency package (Rulings/APAs) OECD BEPS actions 12 & 13 FATCA and Intergovernment al Agreement (IGAs) Sector initiatives: Extractive Industries Transparency Initiative (EITI) Dodd-Frank Act Support from political bodies (G 20/G 8)
The transparency timeline 2009 ► September 2009 OECD proclaims a “revolution” in transparency and exchange of tax Information 2003 -4 2003 ► June 2003 Extractive Industries Transparency Initiative (EITI) launched 2004 ► 2004 UK introduces Disclosure of Tax Avoidance Schemes (DOTAS) 4 March – May 2010 ► 18 March 2010 FATCA signed into law ► May 2010 Amendment of OECD Multilateral Convention (Mutual Administrative Assistance in Tax Matters) 2009 Jul – Sep 2010 ► 21 July 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act signed into federal law ► 24 September 2010 US IRS releases final schedule/instructions for Schedule UTP March-June 2013 ► 29 May 2013 Australia introduces a tax bill on public report by ATO for companies with annual income of $100 million or more ► 13 June 2013 UK launched “Fair Tax Mark” 2010 2013 June – Dec 2013 ► June 2013 EC asks information about tax ruling practice ► June 2013 March-June 2014 ► 30 January 2014 Feb – Mar 2015 ► 9 February 2015 OECD Discussion Draft on BEPS Action 13 Implementation guidelines for Cb. CR issued by OECD ► 13 February 2014 ► 18 March 2015 OECD releases Common Reporting Standards EC proposes for Transparency Package ► 11 June 2014 ► 19 March 2015 Announcement by EC on state aid investigations 2014 20152017 Sep 2015 – 2017 Aug – Dec 2014 ► 13 August 2014 Standard for Automatic Exchange of Information in Tax Matters (OECD) Information request about IPregimes from the ten EC Member States ► 16 September 2014 ► 31 December 2013 EC extends information enquiry on tax ruling practice to all Member States Deadline for EU Member States to transpose country by country reporting obligation for banks under CRD IV into domestic law EC’s negotiations with Switzerland on landmark tax transparency agreement Report on BEPS Action 5 (OECD) ► 17 December 2014 ► September 2015: OECD BEPS Action 12 finalized ► November 2015: Heads of G 20 endorse ► January 2016: MCAA signed in Paris ► 1 January 2016: Exchange of cross-border tax rulings/ APAs to commence under revised EU Directive on Administrative Cooperation ► 2016: Early adopting countries begin automatic exchange of tax information using the OECD CRS ► 2017: First exchange of information under Cb. CR, using FY 2016 data
Country by Country (Cb. C) Reporting TP Master file Cb. C reporting: getting a good look inside What it is: Companies will have to provide tax authorities with countryspecific allocation of profits, revenues, employees and assets; worldwide adoption expected by 2017, though specific adoption deadlines will vary by country. TP Local file Cb. C report What it is not: Not intended as a substitute for a full transfer pricing analysis, nor is it intended for use in formulary apportionment-based adjustments. But it will feed into tax audits. 28 Cb. C Reporting Why this early focus is needed: Because of the level of complexities involved with cross-border transactions, and data collection and management, many companies are already preparing now, testing and validating processes and technologies.
Master file – information required Organizational structure Structure chart: ► Legal ownership ► Geographic location Intercompany financial activities Financial and tax positions Overall strategy description Financing arrangements for (related and unrelated) lenders Annual consolidated financial statements Supply chain of: ► Five largest products/ services by turnover ► Products/services generating more than 5% of sales List of important intangibles and legal owners Identification of financing entities List and description of existing unilateral APAs and other tax rulings Main geographic markets of above products List of important intangible agreements Details of financial transfer pricing policies List and brief description of important service arrangements R&D and intangible transfer pricing policies Functional analysis of principal contributions to value creation by individual entities Details of important transfers Business description Intangibles Important drivers of business profit Business restructuring/ acquisitions/divestitures during fiscal year 29 Master file Cb. C report Local file
Cb. C reporting Implementation status Status Non compliance is a criminal offense in the Netherlands Already implemented Implementation in progress Ireland United States France Italy Japan Mandatory for large UK parented groups only China: Filing due with tax return on 31 May § § § Spain’s group definition based on control Does not include surrogate parent concept Equity rather than stated capital and accumulated earnings OECD BEPS project outcomes: New reporting under Action 13
Action 13: Cb. C reporting OECD Australia China Denmark Status Adopted legislation on 3 December 2015, to take effect as of 1 January 2016. Draft legislation published Bill approved by parliament on 18 December 2015, to take effect as of 1 January 2016. Who Ultimate Parents of group with revenue of EUR 750 million or greater Threshold of AUD 1 billion (approximately EUR 670 million) Threshold of RMB 5 billion (approximately EUR 705 million) Threshold of DKK 5. 6 billion (approximately EUR 750 million) When For fiscal years starting in 2016, with filing within 12 months from fiscal year end Secondary filing rule Penalties P To be filed together with the annual tax return (due 31 May). Possible to apply for an extension. 1. Local filing or Local filing 2. Filing by named “Surrogate Filing by "next tier parent Parent” entity" Local filing Left to countries General penalty regime. General penalty for non compliance Consistent with OECD recommendations P Finland Draft bill published on 21 December 2015. France Bill approved by parliament on 18 December 2015, to take effect as of 1 January 2016. P P The government intends for the provisions to be enacted and effective beginning of 2017. P Local filing P General penalty regime. P Penalties in the maximum amount of EUR 25, 000. Specific penalty regime. Should not exceed EUR 100, 000
Action 13: Cb. C reporting OECD Status Who Ultimate Parents of group with revenue of EUR 750 million or greater When Ireland Adopted legislation applicable as of 1 January 2016 Penalties Left to countries P P 1. Local filing or 2. Filing by named “Surrogate Parent” entity Japan Mexico Netherlands Published legislation in the Draft legislation published on Published legislation on 18 Published legislation in the Official Gazette on 30 16 December 2015. November 2015, to apply as Official Gazette on 30 December 2015, to apply as of 1 January 2016. P For fiscal years starting in 2016, with filing within 12 months from fiscal year end Secondary filing rule Italy P Revenues in excess of JPY 100 billion (approximately US$820 million) Proposed to apply to taxable years beginning on or after 1 April 2016 Revenues in excess of 12 billion pesos (approximately EUR 650 million) P P P Local filing P Penalty applicable for not complying with tax return obligation. Consistent with OECD recommendations P Specific penalty between € 10, 000 and € 50, 000 may apply. General penalties and presumptive taxation may apply in case of noncompliance. In addition to penalties, non Criminal penalty for non compliant taxpayers may be compliance disqualified from entering into contracts with the Mexican public sector.
Action 13: Cb. C reporting OECD Norway Poland Status Published draft legislation for Adopted regulations consultation on 2 December applicable as of 1 January 2015. 2016. Who Ultimate Parents of group with revenue of EUR 750 million or greater Revenues in excess of NOK 6. 5 billion (approximately USD 730 million) For fiscal years starting in 2016, with filing within 12 months from fiscal year end First reporting should be done in 2018 based on figures from 2016. When Secondary filing rule Penalties 1. Local filing or 2. Filing by named “Surrogate Parent” entity Left to countries Spain Adopted implementing regulations applicable as of 1 January 2016. P P United Kingdom United States Enabling legislation adopted. Proposed regulations Draft regulations published on 21 December 2015. Threshold of £ 586 million (approximately EUR 790 million) P Revenue of $850 million or greater For taxable years beginning on or after the date final regulations are published None Local filing Voluntary local filing None General penalty for non compliance with reporting obligations Specific penalty for non compliance General reporting-related penalties may apply P General penatly for non compliance.
Who is the reporting entity? Group: Collection of two or more enterprises related through ownership or control such that it is required to prepare consolidated financial statements (or would be so required if publicly traded) Ultimate Parent ► ► Any local entity Top entity No other entity owns a controlling interest ► ► ► Files Cb. C report with tax authority where it is resident Tax authority will share with other countries under information exchange relationships PRIMARY REPORTING ► If country of Ultimate Parent does not require Cb. C reporting for the Group, or Local country is not receiving Cb. C report from Ultimate Parent jurisdiction Unless the Group appoints Surrogate Parent, and Local country rules allow for Surrogate Parent Files Cb. C report with tax authority in each such local country under country’s rules Surrogate Parent ► ► If country of Surrogate Parent requires Cb. C reporting and local country has arrangement in place to receive such information from country of Surrogate Parent, and Country of Surrogate Parent and local country both have been informed Files Cb. C report with tax authority where it is resident Tax authority will share with other countries under information exchange relationships SECONDARY REPORTING OECD BEPS project outcomes: New reporting under Action 13
Governments and business will have to learn to live in a transparent environment Ø Ø Exchange of Information (EOI) on request and rapidly moving to automatic C by C and the Master File Disclosure provisions on tax planning schemes Joined up tax administrations Are tax administrations able to use all this information and prepared to be transparent themselves? 30
- Slides: 12