On 8 May 2024, the Directorate-General for Taxation and Customs Union (DG TAXUD) of the European Commission published the Taxation and Customs Union Management Plan 2024.
To develop a stronger, fairer and more efficient Single Market, DG TAXUD will continue to push for the swift implementation of the landmark 2-pillar international corporate tax reform. The reform proposal, agreed in 2021, entails the reallocation of taxing rights for the 100 biggest and most profitable multinationals (Pillar One) and the establishment of a minimum effective tax rate worldwide (Pillar Two). The tax treaty between Estonia and France entered into force on April 30, 2024.
The treaty generally applies from July 1, 2024, for Pakistan, and from January 1, 2025, for Estonia. Further information will be reported when available. India’s Central Board of Direct Taxes entered into a record 125 advance pricing agreements (APAs) in FY 2023-24 with Indian taxpayers.
This includes 86 unilateral APAs (UAPAs) and 39 bilateral APAs (BAPAs). This marks the highest ever APAs signed in any financial year since the launch of the APA program. The number of APAs signed also represents a 31 percent increase compared to the 95 APAs signed during the preceding financial year. With this, the total number of APAs since inception of the APA program has gone up to 641, comprising 506 UAPAs and 135 BAPAs. Hong Kong gazettes bill to introduce a new patent box regime under which qualifying income will be taxed at five percent.
The portion of eligible intellectual property income that will be taxed at the five percent rate will be determined in a manner that would be consistent with the "nexus approach" in BEPS Action 5, and will also take into account certain expenditures incurred by the previous owner of the intangible asset if conditions are met. The bill is subject to legislative amendments. The new regime is intended to have retrospective effect for financial years ending on or after April 1, 2023. The British Virgin Islands has issued a notice excluding the United Arab Emirates from the list of jurisdictions without a corporate income tax system.
The notice, issued by the International Tax Authority, pertains to the rules on economic substance. The notice states that entities should carefully consider the financial periods when claiming non-residence status in the United Arab Emirates. Bangladesh and Qatar signed a tax treaty on April 23.
Further information will be reported when available. Portugal is planning to reduce the corporate tax rate by two percentage points from 21 percent to 15 percent, per year, over three years.
The proposal is part of a government program, which was approved on April 10, 2024, and was, thereafter, submitted before Parliament. Further information will be provided when available. On 8 April 2024, the Treasury Law Amendment (Making Multinationals Pay Their Fair Share - Integrity and Transparency) Act, 2024 was enacted.
The newly classified general class investors will be subject to one of three new tests: fixed ratio test, group ratio test, or third party debt test. Financial entities will continue to be subject to the existing safe harbor test and worldwide gearing test or may choose the new third party debt test. The amendments apply to assessments for income years commencing on or after July 1, 2023, with the exception of new integrity rules (debt deduction creation rules) which apply in relation to assessments for income years starting on or after July 1, 2024. The International Monetary Fund (IMF) has released a Working Paper discussing the implications of the global minimum tax from the perspective of low-tax jurisdictions.
The paper argues that it is not possible to design a system that always guarantees generating exactly the bare minimum tax intended by the rules and motivates that this should not be the policy objective anyway. The paper notes that there is an opportunity to endorse a broader tax reform that can be beneficial for low-tax jurisdictions. The paper is authored by Shafik Hebous, Cory Hillier, and Andualem Mengistu. The Australian Taxation Office (ATO) has been successful in the Full Federal Court decision of Singapore Telecom Australian Investments PTY Limited (SingTel) vs Commissioner of Taxation.
The decision confirms SingTel claimed a transfer pricing benefit for deductions based on interest paid on loans between two of its subsidiaries regarding its acquisition of Optus in 2002. Deputy Commissioner Rebecca Saint said this decision is another substantial win for the ATO and the Tax Avoidance Taskforce. On March 21, 2024, the Australian Treasury released exposure draft legislation to implement a global and domestic minimum corporate tax rate of 15 percent.
The draft legislation is part of a global effort to prevent a race to the bottom on corporate income tax. The legislation ensures Australia will be among the lead jurisdictions implementing these global and domestic minimum taxes as a key part of the OECD/G20 Two‑Pillar Solution that was agreed in 2021. Comments on the draft law must be received by April 16. Members of the OECD/G20 Inclusive Framework on BEPS (Inclusive Framework) continue to make steady progress in the implementation of the BEPS package to tackle international tax avoidance, as the OECD releases the latest peer review report assessing jurisdictions' efforts to prevent tax treaty shopping and other forms of treaty abuse under Action 6 of the OECD/G20 BEPS Project.
A revised peer review document forming the basis of the assessment of the BEPS Action 6 minimum standard was also released today. The sixth peer review report on the implementation of the Action 6 minimum standard on treaty shopping, which includes data on tax treaties concluded by jurisdictions that were members of the Inclusive Framework on 31 May 2023, reveals that most agreements concluded between the members of the Inclusive Framework are either already compliant with the Action 6 minimum standard or will shortly come into compliance. On March 11, 2024, US President Joe Biden submitted the country’s 2025 Budget, including key international tax measures.
The Budget proposes to raise the corporate income tax rate to 28 percent, the corporate alternative minimum tax rate on billion-dollar corporations from 15 percent to 21 percent, and the tax rate on US multinationals’ foreign earnings from 10.5 percent to 21 percent. The Budget also seeks to reform international taxation by revising the global minimum tax regime, limiting inversions, and making related reforms; and adopting the undertaxed profits rule. It also seeks to revise the rules that allocate Subpart F income and GILTI between taxpayers to ensure that Subpart F income and GILTI are fully taxed, among other proposals. The OECD organized a transfer pricing capacity building workshop for representatives from 13 West African countries’ tax administrations, and from the Economic Community of West African States (ECOWAS) and the West African Economic and Monetary Union (WAEMU) Commissions.
The workshop was organized between March 5-7, 2024, in Ghana, as part of the Fiscal Transition Support Programme (FTSP) in West Africa. The workshop is the fifth in a four-year capacity building cycle that has created a network of some thirty West African transfer pricing experts. It follows on from the capacity building workshops held in Dakar and Lomé in 2023, and deals with the approaches that developing countries can consider adopting to prevent tax disputes between states, thereby strengthening legal certainty for businesses and improving the investment climate. The tax treaty between Croatia and Egypt entered into force on March 1, 2024.
The treaty applies from January 1, 2025, for withholding taxes. Further details will be provided when available. |
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