ANTI - Associazione Nazionale Tributaristi Italiani


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CFE's Global Tax Top 5 N°4





CFE Tax Top 5 - 2018



Issue 4 2018 - Brussels, 27 April 2018




UpdatesThe OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes, has published 9 peer review reports which assess the compliance of a country with international tax transparency standards. The Global Forum includes 150 members, including all G20 and OECD countries, as well as international financial institutions. Estonia, France, Monaco and New Zealand were rated as being “compliant” which the standards, whilst The Bahamas, Belgium and Hungary received a rating of “largely compliant”, and Ghana “partially compliant”. A supplementary report was also issued concerning Jamaica’s progress with tax transparency standards, in which it was attributed a rating of “largely compliant”.


Additionally, the OECD has published 14 transfer pricing country profiles, setting out current transfer pricing practices within each of those countries. The profiles are created using information provided by the nations themselves in responses to questionnaires, focussing on current legislation in that country concerning transfer pricing principles, and whether or not the country follows the OECD Transfer Pricing Guidelines. Concepts such as the arm’s length principle, transfer pricing methods and documentation are the particular focus of the profiles.


Profiles were published concerning Australia, China, Estonia, France, Georgia, Hungary, India, Israel, Liechtenstein, Norway, Poland, Portugal, Sweden and Uruguay respectively, and the profiles for both Belgium and the Russian Federation were updated. Profiles are now available for 44 countries. 



Additionally, the United Kingdom announced this month proposed changes to remedy errors and omissions to the list of reservations and notifications made by the UK when it signed the OECD’s Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). It proposes to add to its list of countries with treaties to be modified the Faroe Islands, Kyrgyzstan, the United Arab Emirates and Ukraine. It has also proposed to remove Germany from the list, on the basis that the countries have since implemented BEPS provisions through bilateral agreement.


Further, Montenegro stated in a press release on 13 April that it intends to join the MLI. The MLI will enter into force on 1 July 2018 on the basis of it having now been ratified by 5 of the signatory countries. 


Japan has also this month enacted tax reform legislation modifying the definition of a permanent establishment under domestic law to implement the recommendations for Action 7 of the OECD BEPS project.


US to Amend Country-by-Country Reporting Regulations & Agreements


The US have announced that guidance concerning country-by-country reporting obligations for large multinationals will be amended on the grounds of national security. The current US regulations, which implement the OECD BEPS transfer pricing tax avoidance action plan, previously set out that reporting requirements apply to multinational groups headquartered in the US, with annual revenues of US $850 million or more. Effective immediately, multinational groups where 50% or more of revenue is derived from contracts with the US government intelligence or security agencies or the Department of Defence can identify in their reporting that they are a specified national security contractor. On that basis, those multinationals are only required to provide information in the reporting schedules concerning the parent entity company, with no other information required to be reported. 


The US also announced on 19 April that the US and Austria have begun negotiations to establish a bilateral agreement that will allow for the exchange of country-by-country reports concerning large multinational companies. Similarly, on April 17 the US announced that negotiations with Indonesian tax authorities had commenced concerning the exchange of country-by-country tax reports on multinational firms.


OECD Reports on Taxation of Personal Savings and Wealth


The OECD have made public reports on The Taxation of Personal Savings, and The Role and Design of New Wealth Taxes. The first report reviewed taxation policy in over 35 OECD countries in relation to savings vehicles, such as bank accounts, shares, pensions and housing. The analysis demonstrated that differences in tax treatment for these vehicles often favour wealthier taxpayers, who largely hold their wealth in those with lower tax rates, such as investment or pension funds and shares, whereas less wealthy taxpayers often hold their savings in highly taxed bank accounts. The report supports the argument for preferential tax treatment for retirements savings, given aging population issues facing most nations, and the potential impact this will have upon social benefits. 


The second report concerning net wealth taxes concluded that where a country has appropriate personal income taxes, capital gains taxes, inheritance or gift taxes there is little indication that a wealth tax is required. However, where inheritance tax is not levied and capital income taxation is low, there may be scope for such a tax. 


India and Kazakhstan Tax Treaty Enters Into Force


A tax treaty between India and Kazakhstan has now entered into force, India’s Central Board of Taxes announced on 13 April. The treaty updates the previous 1996 agreement, and specifically allows double taxation relief in relation to transfer pricing, as well as setting out new permanent establishment provisions. In addition, the treaty updates provisions concerning the exchange of information for tax purposes.


China Reduces VAT Rate


On 4 April, China announced a 1% reduction of the top two VAT rates in the country, as well as an increase of the current threshold for so-called general VAT taxpayers. It is expected that this will be of great benefit to SME enterprises, who under the present regime if classified as a general VAT taxpayer as are not able to deduct input VAT against output VAT. The threshold for a general VAT taxpayer has been increased from a turnover of RMB 500,000 to 5,000,000. It is expected this reform will stimulate the growth of manufacturing and start-up businesses in particular, and will have a significant economic impact, equal to that of US tax reform. 




The selection of the remitted material has been prepared by

Piergiorgio Valente/ Aleksandar Ivanovski/ Brodie McIntosh/ Filipa Correia




According to media reports, the European Commission is about to issue a decision that the rulings of the Irish tax administration on the tax treatment of two subsidiaries of Apple, Apple Sales International und Apple Operations Europe, were illegal state aid. The decisive element in distinguishing state aid from tax is the question whether the advantageous treatment of an undertaking or group of undertakings has been selective. State aid affecting trade between member states is in principle incompatible with the EU single market, subject to a limited number of exceptions and to notification to the European Commission which, in the case of Apple, has not taken place. If the aid is found to be illegal, Ireland will have to claim back billions of unpaid tax from Apple. There are two similar cases pending, concerning Starbucks in the Netherlands and Fiat Finance and Trade in Luxembourg.


- European Commission press release of 11 July 2014 (opening of investigations)



2. Germany referred to Court over VAT refund rules for non-EU operators


On 25 September 2014, the European Commission decided to refer Germany to the EU Court of Justice regarding its rules on VAT refund which discriminate against non-EU operators. Under German legislation, operators established in another EU member state can authorise a third person to sign or submit their refund form to recover VAT, but taxable persons established outside the EU must personally sign the application form. The Commission considers that this requirement for third country operators goes against the EU law principles of effectiveness, proportionality and equivalence. There is no provision in EU law which requires VAT refund forms to be personally signed.


- Press release of 25 September 2014



3. Commission asks Italy to amend inheritance tax law


On 25 September 2014, the European Commission has requested Italy to amend its inheritance tax legislation which discriminates against bequests to non-profit organisations in another EU or EEA country. Under Italian law, legacies to non-profit organisations pursuing public and social goals are exempt from tax. However, if these are established elsewhere in the EU/EEA, an exemption is only granted if there is reciprocity from that member state, otherwise, the legacy is taxed at 8% of its value. In addition, Italian legislation excludes Italian bonds and public securities from the inheritance estate, while bonds and public securities issued by other EU and EEA states are not allowed this exclusion. The requests take the form of two reasoned opinions, giving Italy two months to react.


- September infringement package



4. CJEU rules on VAT on services supplied by a non-EU main company to its EU branch


On 17 September 2014, the Court of Justice of the EU (CJEU) has rendered its judgment on the case Skandia (C-7/13) concerning the question whether services supplied by a main company with its seat in a third country to its branch belonging to a VAT group within an EU member state are taxable. The Court confirmed this where the branch belongs to a group of persons whom it is possible to regard as a single taxable person for VAT purposes.


- Judgment



5. Commission refers the Netherlands to CJEU over VAT treatment of water sport activities


On 25 September 2014, the European Commission has decided to refer the Netherlands to the EU Court of Justice for failing to fully comply with EU rules on VAT exemptions for water sports activities. According to the Commission, Dutch legislation is too strict to the extent that it exempts sport or physical education services by non-profit organisations from VAT only if these services are provided by volunteers, and too wide to the extent that they exempt the letting of berths and moorings for vessels provided by these water sport organisations even when it is not linked to sport activities.


- Press release


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