BEPS - ילארשי טבמו תינכדע בצמ תנומת€¦ · Brightman Almagor Zohar & Co....
Transcript of BEPS - ילארשי טבמו תינכדע בצמ תנומת€¦ · Brightman Almagor Zohar & Co....
© 2017 Brightman Almagor Zohar & Co. מחלקת מיסוי בינלאומי, מנהל בכיר, משה בינה ,Deloitte
BEPS -ישראלי תמונת מצב עדכנית ומבט
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• BEPS Background
• Treaty Related Action Plans
• Harmful Tax Practices
• Transfer Pricing
• Others
• Next Steps
Agenda
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BEPSBackground
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Cross Border Income Shift
Intercompany Loans, Licensing, Provision of Services, Production and Sale of Products.
Is Each Country Engaged in these Transactions
Receiving Their Fair Share of Revenue?
High Taxed CountriesInterest
Royalties
Products
Services
Low Taxed Countries
Belgium France Germany
Italy
Argentina
Mexico Colombia
BrazilJapanSpain
Ireland Malta
Hong KongSingapore
BermudaSwitzerland
Cayman Islands
Luxembourg
What is the debate all about?
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1. Digital economy
2. Neutralising hybrids3. Strengthen CFC rules4. Limit interest / finance deductions5. Counter harmful tax practices – substance
6. Prevent treaty abuse 7. Prevent PE avoidance 8. Value creation – intangibles9. Value creation – risk & capital10. Value creation – high-risk transactions
11. Data collection / analysis12. Disclosure (aggressive tax planning)13. Transfer pricing documentation14. Dispute resolution
15. Multilateral instrument
Establishing international coherence of corporate income taxation
Restoring the full effects and benefits of international standards
Ensuring transparency while promoting increased certaintyand predictability
From agreed policies to tax rules: the need for a swift implementation of the measures
BEPS’s Agenda
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November 2012
Feb 2013
May 2013
June 2013
July 2013
G20 leaders met
OECD released
“Addressing Base
Erosion and Profit
Shifting”
European
council meeting
Forum of Tax
Administration
meeting
OECD’s
Committee on
Fiscal Affairs to
agree action
plan
OECD’s action
plan delivered to
G20 Finance
Ministers
G8 Summit
September 2014 September 2015 December 2015
Delivery of:
• Report on digital environment
• Changes to model tax convention
• Recommendations for domestic rules
• Review of member country tax
regimes
• Changes to Transfer Pricing
Guidelines
• Report on international law and
multilateral instrument
Delivery of:
• Further recommendations for
domestic rules
• Strategy to expand participation to
non-OECD members
• Further changes to the model tax
convention
• Changes to the transfer pricing
guidelines
• Recommendations regarding data
to be collected
Delivery of:
• Further changes to the
transfer pricing guidelines (re:
interest deductions)
• Revision of existing criteria
regarding harmful tax regimes
• A multilateral instrument
BEPS history and timeline
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Recommendations
• CFC rules
• Disclosure rules
BEPS output for legislationThree distinct groups
Multilateral Instrument to speed implementation during 2017
Minimum Standard
• Permanent establishment
• Treaty abuse
• Transfer pricing
• Country-by-country reporting
• Dispute resolution
• Harmful tax practices
Best Practice
• Interest restrictions
• Hybrid mismatches
• Transfer pricing documentation
• VAT on business to customers digital services
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BEPS Timetable
Countries sign Multilateral Convention
Review of country-by-country reporting
20168 Oct 2015
Nov 2015
21-22 Sept 2015 2017 2020
Committee on Fiscal Affairs approves Actions
G20 Finance Ministers
G20 Leaders
Release of updated OECD model treaty
Countries implement agreed actions –2016- 18?
Review of digital economy
Treaty Related Action PlansActions:1, 2, 6, 7, 14, & 15
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Treaty Related Action Plans
Follow up work
Multi-Lateral Convention
Domestic legislation
The Multilateral Convention
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# Title Article Rule type
I Scope and interpretation of terms 1 and 2
II Hybrid mismatches• Transparent entities• Dual resident entities• Elimination of double taxation
3 to 5
Substantive BEPS changes
+
Specific implementation rules to modify existing treaties
III Treaty abuse• Purpose of tax treaties*• Prevention of treaty abuse*• Dividend transfer transactions• Capital gains on interests in land rich
entities• Third country PEs• Taxation of own residents
6 to 11
IV Avoidance of PE status• Commissionaires & similar arrangements• Specific activity exemptions• Splitting-up of contracts
12 to 15
V Improving dispute resolution* 16 and 17
VI Arbitration 18 to 26
VII Final provisions 27 to 36 Generalimplementation rules
* BEPS minimum standards
Multilateral implementation of specific BEPS recommendations
BEPS Action 15: The Multilateral Convention (MLC)
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General structure of main operative provisions
Multilateral Convention
Substantive rule
Compatibility clause
Reservations
Notifications
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Next steps
Multilateral Convention
• Key issues for governments
o Sign?
o Decide which treaties to cover
o Determine positions on options and reservations, make notifications, and determine position regarding binding arbitration
o Domestic law ratification processes
• OECD to act as Depositary
• “Speed dating” event held March 2017
• Planned signing from June 2017
Domestic Legislation
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Domestic LegislationAction 7
• DPT
• MAAL
• DPT
• MAAL & DPT – DPT Ruled unconstitutional
• DPT +
• Digital Economy Circular + VAT
United Kingdome
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Australia
France
New Zealand
Israel
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Domestic Legislation DPT / MAAL Situation
Sales / services
Sales / services
Sales promotion
Sales / services
Sales promotion
Non-residentRelated party Related party
CustomerThird party channel provider
Customer
Non-resident
Follow Up Work
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Action 7 Discussion draft: Attribution of profits to PEs
• Disagreement as to the status of the authorized OECD Approach to the Attribution of Profits (AOA)
Increase of PE situations however, no increase in the scope of Pes
The key lessons from the examples in the discussion draft are
• Profits attributable to the dependent agency PE might fall (even to zero)
• Profit attribution to a warehouse might be relatively small
Was it worthwhile?
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Other discussion drafts
BEPS Action Updates
2Hybrid mismatches
• Discussion draft on branch mismatches (August 2016)
• Addresses D/NI and DD outcomes that can result from differences in treatment between branch and head office countries
4Interest deductions
• Discussion drafts (July 2016)
o Design and operation of group ratio rule (option that can override fixed ratio)
o Banking and insurance sector-specific issues
• Updated Action 4 Report released in December 2016 to include guidance fromthese discussion drafts
6Treaty abuse
• Discussion draft (January 2017) on entitlement to treaty benefits for non-CIV funds, comprising three examples of when PPT should be met
o Regional investment platform (established by a third country fund)
o Securitisation company (established by a third country bank, entitled to equivalent treaty benefits)
o Real estate fund (whose investors are entitled to equivalent treaty benefits)
Harmful Tax Practices
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Action 5 – Harmful Tax Practices
Change of Rules Worldwide
Stay Attractive
Nexus Approach
Transfer Pricing
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Transfer Pricing
Action 13Actions 8-10
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Action 8 – 10 Substantive Rules
• New OECD guidance
• Slow adoption
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Action 13: Transfer Pricing Documentation
Broadly accepted
Parent company country filing and information exchange and less so on direct filing
notification requirements
“gap year”
CbC Multilateral Competent Authority Agreement (MCAA)
Harm
on
izati
on
wit
h O
EC
D 3
Sta
nd
ard
s
Low
Medium
High
Documentation reforms
Low Medium High
U.S.
Taiwan
Malaysia
UK
Japan
China
Australia
Singapore
India
Korea
Country by Country Report Master File / Local File
Others
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Others
Hybrids
Interest Limitation
CFC
Local / MLCEU ATAD
Local / MLCEU ATAD
Local / MLCEU ATAD
BEPS - Next Steps
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BEPS – Next Steps
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Understand
Prepare
Consider
Implement
Monitor
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