OECD BEPS action plan report - PKF International · 3 OEC BEPS Action Plan Status Update eport OECD BEPS Action Plan Report Status Update December 2018 Background • Taxation is

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OECD BEPS Action Plan Status Update Report

OECD BEPS Action Plan Report - Status Update - December 2018

OECD BEPS action plan reportstatus update December 2018

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Background• Taxation is at the core of countries’ sovereignty, but the interaction of domestic tax rules can lead to gaps and frictions;

• Existing tax rules have revealed numerous weaknesses;

• In the changing international tax environment, in combination with the ongoing financial crisis, concern has been expressed regarding the international tax standards;

• The G20 Finance Ministers called on the OECD to develop an Action Plan;

• The goal is to make fundamental changes to the current mechanism in order to:

– Prevent double non-taxation;

– Prevent no or low taxation;

– Develop new harmonized international standards on corporate income taxation at an international level;

• This resulted in the OECD BEPS Action Plan Report with 15 action points and corresponding timelines.

Objective• The PKF International Tax Network is pleased to provide you with a status update of the global implementation of the OECD BEPS Action Plan

Report;

• The PKF International Tax Network commits to update this report on a six-monthly basis.

For your convenience, please find a summary of the 15 Action Points discussed by the OECD BEPS Action Plan Report below:

Status UpdateDecember 2018

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1Action Point

Digital economy

Action 1 aims to identify and address the

main challenges that the digital

economy poses for the existing

international tax rules

2Action Point

Hybrids

Action 2 aims to neutralize the

effects of hybrid mismatch

arrangements by making changes to

the Model Tax Convention and

providing recommendations

on the design of domestic rules to

prevent hybrids from being a

source of ‘double non – taxation’

3Action Point

CFCs

Action 3 aims to develop

recommendations regarding the

design and strengthening of

controlled foreign corporation (CFC) rules, to address

concerns over the possibility of

creating affiliated non – resident taxpayers and

routing income of a resident enterprise through the non – resident affiliate or

avoid taxation

4Action Point

Interest deductions

Action 4 aims to limit base erosion

via interest deductions and

other financial payments.

Recommendations are expected to be

published for domestic law

limitations on tax deductions for both

related and unrelated party

interest expense and economically

equivalent payments. The workstream will

also develop guidance for the

transfer pricing of debt arrangements

5Action Point

Harmful tax practices

Action 5 aims to identify and counter

harmful tax practices, taking

into account transparency and

substance. The Action Plan will

look at developing both

recommendations on the definition of

harmful tax practices and a

strategy to expand to non – OECD

members

6Action Point

Prevent treaty abuse

Action 6 aims to prevent treaty

abuse, through developing model

treaty provisions and

recommendations regarding the

design of domestic rules to prevent the

granting of treaty benefits in

inappropriate circumstances

7Action Point

PE status

Action 7 aims to prevent the

artificial avoidance of Permanent Establishment

(“PE”) status, by redefining the threshold for

creating a PE to prevent base

erosion and profit shifting. The work

includes a focus on the use of

commissionaires and keeps some

specific activity exemptions, including for warehousing

8Action Point

TP - intangibles

Action 8 looks specifically at

intangibles and will develop transfer

pricing rules to prevent base

erosion and profit shifting where intangibles are

owned by, used by, contributed to or moved among group members

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9Action Point

TP – capital related high-risk transactions

Action 9 looks specifically at risks and

will develop transfer pricing rules to prevent

base erosion and profit shifting by transferring risks

among, or allocating excessive capital to,

group members

10Action Point

TP – other high-risk transactions

Action 10 looks specifically at other

high-risk transactions and will develop

transfer pricing rules to prevent base erosion and profit shifting by

engaging in transactions which

would not, or would only very rarely, occur between third parties

Action Point

BEPS data collection

Action 11 aims to establish

methodologies to collect and analyse

data on BEPS and the actions to address it. The OECD intends to do this by developing

recommendations regarding indicators

of the scale and economic impact of

BEPS and ensure that tools are available to monitor and evaluate the effectiveness and economic impact of the actions taken to

address BEPS on an ongoing basis

Action Point

Disclosure of aggressive tax planning

Action 12 aims to require taxpayers

to disclose their aggressive tax planning arrangements. This will be addressed through

the development of recommendations

regarding the design of mandatory disclosure rules for aggressive or abusive transactions,

arrangements or structures, taking

into consideration the administrative costs

for tax administrations and businesses

and drawing on the experiences of the

increasing number of countries that already

have such rules

Action Point

TP – documentation

Action 13 aims to re- examine transfer

pricing documentation and will develop rules

regarding transfer pricing documentation

to enhance transparency for tax

administration, taking into consideration the compliance costs for

business

Action Point

Dispute resolution

Action 14 aims to make dispute

resolution mechanisms more effective,

through developing solutions to address

issues that prevent countries from

resolving treaty- related disputes under mutual agreement procedures

Action Point

Multilateral instrument

Action 15 aims to develop a multilateral instrument to enable

jurisdictions to implement measures

developed in the course of the work on BEPS and to amend

bilateral tax treaties

11 12 13 14 15

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Country PageAlgeria 10

Argentina 12

Australia 15

Austria 18

Azerbaijan Republic 20

Belgium 22

Brazil 24

Bulgaria 26

Cameroon 29

Chile 31

China 34

Colombia 38

Costa Rica 41

Croatia 43

Cyprus 46

Czech Republic 49

Denmark 51

Egypt 54

Estonia 56

France 58

Germany 62

Greece 65

Hong Kong 67

Hungary 71

Country PageIndia 73

Ireland 76

Italy 79

Japan 82

Jordan 86

Kuwait 88

Latvia 90

Libya 92

Luxembourg 94

Macedonia 98

Malta 100

Mauritius 103

Mexico 106

Morocco 108

Nepal 110

Netherlands 112

New Zealand 117

Nigeria 119

Norway 121

Pakistan 123

Poland 127

Portugal 131

Qatar 134

Romania 138

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The content of the PKF OECD BEPS Action Plan Status Update Report has been compiled and coordinated by both Kurt De Haen ([email protected]) and Janke Tierens ([email protected]) of PKF-VMB Tax Consultants cvba (PKF-VMB). Please contact Kurt or Janke should you have any questions, comments or suggestions.

Country PageRussia 140

Saudi Arabia 143

Singapore 145

Slovakia 147

Slovenia 150

Somalia 152

South Africa 154

South Korea 160

Spain 163

Sultanate of Oman 167

Swaziland 169

Sweden 171

Switzerland 174

Taiwan 178

Thailand 182

Tunisia 184

Turkey 186

United Arab Emirates 190

United Kingdom 194

United States of America 201

Uruguay 204

Vietnam 206

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Abbreviation DescriptionAEOI Automatic Exchange of (Financial Account) InformationAOA Authorized OECD ApproachAPA Advance Pricing AgreementATAD Anti-Tax Avoidance DirectiveB/S Balance SheetB2B Business to BusinessCbC Country-by-CountryCFC Controlled Foreign CorporationCRS Common Reporting Standard

DoTAS Disclosure of Tax Avoidance SchemeDTT Double Tax TreatyEBIT Earnings Before Interest and Taxes

EBITDA Earnings Before Interest, Taxes, Depreciation and AmortizationEEA European Economic Area

FATCA Foreign Account Tax Compliance ActFTA Forum on Tax Administration

GAAR General Anti-Abuse RuleGST Goods and Services TaxIP Intellectual Property

LoB Limitation on Benefits

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Abbreviation DescriptionLSA Location Specific AdvantagesMAP Mutual Agreement Procedure

MCAA Multilateral Competent Authority AgreementMLI Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPSMNE Multinational EnterpriseMoF Ministry of Finance

MOSS Mini One Stop ShopNCST Non-Cooperation State or TerritoryNHTE New/High Technology EnterprisesOTD Offshore Taxation DivisionPE Permanent Establishment

PPT Principal Purpose TestPSD Parent Subsidiary DirectiveSAT State Administration of TaxationTIEA Tax Information Exchange AgreementTP Transfer PricingVAT Value Added TaxWHT Withholding TaxVAT Value Added TaxWHT Withholding Tax

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Country AlgeriaPKF member firm Cabinet Meguellati

Your contact Anisse Raouf Benmeradi

Email [email protected]

Action Point Status of Action Point “In the pipeline”

1 Digital economy • No specific action taken yet. n/a

2 Hybrids • No specific action taken yet. n/a

3 CFCs • There is no CFC legislation in Algeria. n/a

4 Interest deductions • No specific action taken yet. However, in Algeria exchange controls are very strict as multinational companies rarely use external financing either with related or unrelated parties, so this risk is indirectly neutralised.

n/a

5 Harmful tax practices • No specific action taken yet. n/a

6 Prevent treaty abuse • No specific action taken yet. n/a

7 PE status • No specific action taken. However, for construction projects domestic tax law obliges foreign companies to create a temporary PE once the contract exceeds an average duration of 6 months.

n/a

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8 TP - intangibles • No specific action taken yet. n/a

9 TP – capital related high-risk transactions

• No specific action taken yet. n/a

10 TP – other high-risk transactions


11 BEPS data collection

• TP documentation must be prepared and submitted by all specified ‘large entities’ at the DGE along with the annual tax return (no later than 30 April of each year). Even if not a ‘large entity’ it is still necessary to compile supporting documentation to demonstrate the arm’s length nature of related party transactions in case a tax authority audit is conducted. Article 4 of the Decree dated 12 April 2012 states the basic TP information that a group must provide and the specific information that a company must provide.

n/a

12 Disclosure of aggressive tax planning


13 TP – documentation

• All the “Large entities” that are registered within DGE (large-sized taxpayers’ direction) must complete and submit yearly TP documentation.

• Although Algerian TP legislation does not require any specific pricing method to be applied, the tax authority issued guidelines in 2010 referring to the OECD methods. Broadly, all OECD methods are acceptable where reasonable and relevant. However, in practice, the Algerian tax authorities apply a ‘comparability’ approach. We understand that the tax authority is strengthening its benchmarking / comparability capability by building its own internal database.

n/a

14 Dispute resolution • No specific action taken yet. n/a

15 Multilateral instrument • No specific action taken yet. n/a

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Country ArgentinaPKF member firm PKF Audisur

Your contact Gustavo Director



1 Digital economy

• Significant WHT rates apply to the digital economy (e.g. 31.5% on software license payments); A wide definition of “Argentine source income”, for services rendered from abroad and used in Argentina; A general anti-avoidance rule (although no specific anti-avoidance rule for the digital economy) is in place.

• VAT: a wide definition of “digital services” on which VAT is levied, i.e. if the provider is resident or domiciled outside Argentina, to the extent that the use or effective exploitation of the services is carried out in Argentina. “Digital services” are considered to be carried out through the internet network or any adaptation or application of the protocols, platforms or technology used by the internet or another network through which equivalent services are provided that, according to their nature, are basically automated and require minimal human intervention.” It is not necessary that the borrower registers as a taxpayer, but if an intermediary intervenes in the payment, then this party will become the “collection at source” agent (banks, credit card companies, etc.).

Already effective

2 Hybrids• Domestic law neutralises the effects of Argentina income tax exemptions if the application of the exemption

could result in a transfer of income to a foreign country, unless a DTT applies.Already effective

3 CFCs• Under certain conditions, Argentine resident shareholders are required to include passive income, stemming

from a participation in a company located in a non-cooperative country, in their taxable basis on an accrued basis.

Already effective

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4 Interest deductions

• Interest on financial debt (excl. commercial debt) with related parties (domiciled in Argentina or abroad), will be tax-deductible up to the limit of 30% of the net profit before deducting such interest and depreciations. The threshold not applied can be deferred for 3 years, and the non-deductible interest can be deducted in the following 5 years up to the limit applicable to each year. This rule is not applicable in some situations (financial entities, among others).

• Furthermore, interest on debt with related parties domiciled abroad or any party domiciled in “non- cooperative countries” will be tax-deductible only when paid (not when accrued).

Already effective


6 Prevent treaty abuse • Argentina signed the MLI on 7 June 2017, and has opted for the simplified LoB provision.Subject to MLI entry into

force

7 PE status• The definition of “PE” is incorporated according to current international standards within the framework of

Action 7, following Option A (preparatory or auxiliary activities excluded).Already effective





• No specific action taken yet, however a special defensive TP mechanism applies to commodities (known as “Sixth Method”).

Already effective

11 BEPS data collection • No specific action taken yet. n/a



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• A TP report is required for “related entities” and for transactions undertaken with non-cooperative jurisdictions (even if no related parties are involved in the transaction);

• A CbC report has to be filed annually with the Tax Authority when the ultimate parent is a company residing in Argentina. In addition, Argentinian entities that are a member of a MNE Group have to file information with the Tax Authority about the MNE Group to which they belong, i.e. whether the group is required to compile CbC reporting as well as the name of the ultimate parent entity.

Already effective


15 Multilateral instrument

• Argentina is one of the 85 signatories of the MLI. The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a

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Country AustraliaPKF member firm PKF Sydney

Your contact Iain Spittal



1 Digital economy

GST has been extended to:

• digital products and services imported by Australian consumers( from 1 July 2017); and

• low value goods imported by Australian consumers (from 1 July 2018).

In addition, legislation to extend the GST to offshore accommodation booking services was recently introduced into Parliament in September 2018.

• GST has being extended to digital products and services supplied by non-residents to Australian consumers from 1 July 2017.

Treasury released a discussion paper in October 2018 entitled “The digital economy and Australia’s corporate tax system” canvassing opinion on potential changes in this area.

2 Hybrids

• Legislation has been passed by Parliament and will commence from 1 January 2019. This operates to prevent international groups from exploiting differences in the tax treatment of a financing instrument or an entity under the laws of different jurisdictions. Included within the package was an targeted integrity measure which can impact on transactions with low tax jurisdictions (less than 10%) where the relevant jurisdiction has been imposed between Australia and an overseas parent entity.

n/a

3 CFCs • There are no proposed changes to Australia’s existing CFC rules. n/a

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• Australia is unlikely to tighten its existing thin capitalisation rules providing a safe-harbour of 60% debt to total assets.

• Legislation has been introduced to require entities to align the value of their assets for thin capitalisation purposes with the value included in their financial statements. In addition, consolidated groups and multiple entry consolidated groups that are foreign controlled, which in turn control a foreign entity themselves, will be treated as both outward and inward investment vehicles for thin capitalisation purposes. This change is intended to ensure that inbound investors cannot access tests that are only intended for outward investors.

n/a

5 Harmful tax practices• The Australian Taxation Office has already commenced exchanging information, rulings

etc. with other Revenue Authorities.

• The Government has announced in its 2018/19 Budget that the list of information exchange countries will be updated to add 56 jurisdictions that have entered into information sharing agreements since 2012.

6 Prevent treaty abuse• Australia has signed the OECD’s MLI and included a PPT clause in its recent new treaty

with Germany.

• Australia will act to incorporate the OECD's recommendations on treaty abuse into Australia's treaty practice.

7 PE status• Australia has taken unilateral action on PE issues by introducing the Multinational

Anti-Avoidance Law. Australia’s current treaty with Germany also adopts some of the recommendations in its PE provisions.

n/a

8 TP - intangibles• The Government has enacted legislation to give effect to Actions 8-10, ‘aligning transfer

pricing outcomes with value creation’.n/a


• The Government has enacted legislation to give effect to Actions 8-10, ‘aligning transfer pricing outcomes with value creation’.

n/a

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• The Government has enacted Diverted Profits Tax legislation which applies to Significant Global Entities (SGEs) from 1 July 2017 and imposes a 40% tax rate on certain profits transferred offshore through related party transactions.

n/a

11 BEPS data collection • Australia has signed the MCAA for the automatic exchange of CbC Reports. n/a


• No specific action taken yet.• The Government is considering mandatory

disclosure rules for taxpayers and advisors in a discussion paper released on 3 May 2016.


• The OECD TP guidelines are incorporated into Australian TP law. Australian taxpayers that are SGEs with global revenue exceeding A$ 1 billion are required to file one or more of the following with the Australian Taxation Office:

- CbC Report; - Master-file; - Local-file.

• The SGE is also required to file General Purpose Financial Statements.

• Australia has also signed the MCAA which involves exchanging CbC reports with other countries.

n/a

14 Dispute resolution• Australia has signed the MLI and intends to adopt the MAP recommendations and is

committed to mandatory binding arbitration.n/a


• Australia signed the MLI on 7 June 2017 and it was ratified in September 2018. Subject to its entry into force for Australia’s relevant partner jurisdictions its various provisions will progressively apply commencing 1 July 2018. This means that the date of effect of the MLI on each of Australia’s Covered Tax Agreements will vary.

n/a

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Country Austria PKF member firm PKF Österreicher-Staribacher (Vienna)

Your contact Thomas Ausserlechner




2 Hybrids• Austria implemented the July 2014 amendment of the EU PSD disallowing the benefits of the Directive

(in essence participation exemption relief) if the “dividend income” gives rise to a “tax deduction” in the source country.

n/a

3 CFCs• For the first time Austria will implement a specific CFC legislation. The new provisions will allow to tax local

entities controlling foreign entities generating passive income which is taxed at less than 12.5%.• comes into effect as of 1

January 2019

4 Interest deductions• Austria has already introduced two specific restrictions for interest deductions within a group, i.e. for

interest on loans to finance intra-purchases of entities and for interest from low tax jurisdictions, but does not apply a general thin capitalisation scheme.

n/a

5 Harmful tax practices • No specific action taken yet (apart from the MLI minimum standard). See * below

6 Prevent treaty abuse• Regulations regarding the prevention of base erosion and profit shifting were adopted in the DTT between

Austria and Liechtenstein in order to prevent abusive advantages of the DTT. Otherwise none apart from the MLI minimum standard.

See * below

7 PE status• Newly concluded Treaty with Japan coming into effect on 1 Jan 2019 is the first Treaty after BEPS to

include the extended definition of a representative PE.See * below

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8 TP - intangibles • No specific action taken yet. See * below


• No specific action taken yet. See * below





• Transformation of Council Directive 2018/822/EU.• Transformation of

adopted Council Directive 2018/822/EU


• Austria has introduced mandatory CbC-reporting from 2016 onwards for businesses with revenue exceeding EUR 750 million.

• For Austrian tax purposes, TP documentation should not mandatorily be filed but on-demand filing is required within 1 month (new TP documentation law just introduced).

n/a

14 Dispute resolution• Austria has announced to include such clauses in current and future treaties and has already done so in

the past with selected parties, such as Germany.n/a


• Austria is one of the 85 signatories of the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and- parties.pdf). The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies. Austria was the first country to deposit the instrument of ratification with the OECD on 22 September 2017. The effective date is likely to be 1 January 2019.

n/a

* Will be considered upon conclusion of new treaties or revision of existing treaties.

http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf


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Country Azerbajian Republic PKF member firm Zenith Audit

Your contact Ziya Husseinzadeh



1 Digital economy

• In accordance with the amendment on Articles 168.1.5, 169.1 and 169.3 of the Tax Code of the Azerbaijan Republic, services and works provided through e-commerce channels are subject to VAT.

• If a non-resident offering the services or works online does not have a tax registration in Azerbaijan, the transferring financial institution must accept VAT from a customer and pay it to the state budget.

• The VAT is not creditable.

n/a


3 CFCs

• New rules approved by parliament on 23 December 2016 and generally applied since 1 January 2017 reflect amendments on TP rules with offshore companies. The new rules are in line with the OECD’s TP guidelines. The TP rules apply to “controlled transactions”, which mean transactions that take place between the following parties:

- An Azerbaijani resident and a non-resident related party; - An Azerbaijani PE of a non-resident and the non-resident (or its PE, branch office or any other division in a

foreign country); and - An Azerbaijani resident or Azerbaijan PE of a non-resident and an entity established (registered) in a country

with a preferential regime.

• Parties (whether individuals or legal persons) will be considered to be related in the following situations:

- One person directly or indirectly holds at least 20% of the shares or voting power in the other person; - One person reports to, or is under the direct or indirect control of, the other person; - Both persons are under the direct or indirect control of a third person; - Both persons have direct or indirect control of a third person; or - The persons are family members, as defined in the tax code.

n/a

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3 CFCs (Continued)• A taxpayer must submit a report on its controlled transactions where the aggregate amount of such

transactions in a calendar year exceeds AZN 500,000. The report must be submitted by 31 March of the year following the year of the transactions.

n/a

4 Interest deductions• The earlier 3-year exemption period from Taxes of Interest on Bank Deposits and Dividends from Investment

Securities has been extended to seven years. This means that the exemption will be valid until 1 February 2023.

n/a



7 PE status • No specific action taken yet. n/a









13 TP – documentation • No specific action taken yet. n/a



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Country Belgium PKF member firm PKF-VMB Brussels

Your contact Kurt De Haen




2 Hybrids

• New Belgian tax law disallowing the benefits of the EU PSD (in essence participation exemption relief) if the “dividend income” gives rise to a “tax deduction” in the source country.

• Belgium has implemented the EU ATAD Directive in domestic tax law with effect as of financial years starting on 1 January 2019.

n/a

3 CFCs • CFC legislation in accordance with EU ATAD Directive is introduced with effect as of financial years starting on 1 January 2019. n/a

4 Interest deductions• There is an equity-based thin capitalisation rule in place for intercompany loans.

• 30% EBITDA thin capitalisation rule in accordance with EU ATAD Directive is introduced with effect as of financial years starting on 1 January 2019 and with regard to intercompany loans concluded as of 17 June 2016.

n/a

5 Harmful tax practices

• Belgian tax ruling commission only signs off on upfront tax ruling decisions if the transaction is embedded with relevant substance.

• Belgian tax ruling decisions regarding cross-border structures that were concluded as of 1 January 2015 are spontaneously shared with other jurisdictions.

• Pursuant to Belgian “Cayman tax” legislation, low-tax (<15%) foreign legal structures lacking both any genuine business rationale and local substance are considered transparent for Belgian tax purposes so that individuals subject to Belgian (non-) resident personal income tax and entities subject to Belgian non-for-profit income tax are taxable in Belgium on the income derived by the foreign legal structure.

• Current Belgian patent income deduction abolished with grandfathering period until 2021 and introduction of “85% innovation tax deduction” (with broader scope) as of 1 July 2016.

n/a

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6 Prevent treaty abuse• New Belgian tax law disallowing the benefits of the EU PSD (in essence 0% Belgian dividend WHT) if

“artificial structure”.n/a

7 PE status• Belgian tax ruling commission only signs off on upfront tax ruling decisions if the transaction is embedded

with relevant substance.

• A Circular Letter regarding profit- and loss allocation between a PE and its head office is currently being drafted.






11 BEPS data collection• Belgian tax ruling decisions regarding cross-border structures that were concluded as of 1 January 2015

are spontaneously shared with other jurisdictions.n/a


• Individuals subject to Belgian (non-)resident personal income tax have to report in their Belgian personal tax return if they are the founder, holder or beneficiary of a foreign legal structure and to what extent such structure is embedded with relevant business substance.

n/a

13 TP – documentation• As of 2016, mandatory TP documentation filing requirements (local file, master file, CbC report and CbC

notification) if conditions are satisfied.n/a

14 Dispute resolution• Belgium is one of the countries which actively participate in the regular debates of the MAP Forum in

order to boost the MAP provided by the current DTTs.n/a


• Belgium is one of the 85 signatories of the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a



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Country BrazilPKF member firm PKF Brazil

Your contact Cleverson Lacerda / Isabel Souza

Email [email protected] / [email protected]


1 Digital economy • No specific action taken yet. See * below

2 Hybrids • No specific action taken yet. See * below

3 CFCs• With the introduction of Law No. 12.973 and Normative Ruling 1.700, Brazilian law has become stricter

regarding the taxation of controlled companies, adopting worldwide taxation.See * below

4 Interest deductions• Thin capitalisation rules have been put in place since 2010, limiting the deduction of interest expenses paid

or due to related parties or companies established in tax havens. However, no specific action has been taken since.

See * below

5 Harmful tax practices• A Provisional Measure introducing a new ancillary obligation regarding this matter had been proposed.

However, it was not converted into law. No specific action has been taken sinceSee * below

6 Prevent treaty abuse • No specific action taken yet. See * below

7 PE status • No specific action taken yet. See * below

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11 BEPS data collection• No specific action taken yet. Although ECF is an electronic version of an Income Tax Return

in Brazil as from calendar year 2017 to inform CbC Report if a Brazilian company is the ultimate or controlled company of affiliates in countries subject to BEPS.

See * below


• A Provisional Measure introducing a new ancillary obligation regarding this matter had been proposed. However, it was not converted into law. No specific action has been taken since.

• Provisional Measure 685/15 was not converted into law: Its provisions are being discussed in the national congress for better implementation.

13 TP – documentation • No specific action taken yet. See * below

14 Dispute resolution• Normative Ruling 1,846/2018 from the Brazilian Federal Revenue Office regulates the mutual

agreement procedure to prevent double taxation in case of breach of DTT´s rules.See * below

15 Multilateral instrument • No specific action taken yet. See * below

* Whilst Brazil is not a member of the OECD, and will not specifically follow the 15 point action plan, it is taking steps towards OECD’s recommendations, promulgating domestic laws enforcing transparency in business relations. E.g. the Brazilian IRS (Receita Federal do Brasil) has issued a Normative Ruling enforcing the communication - through an ancillary obligation named ECF - of business transactions with companies that are members of the OECD, and therefore, subject to BEPS. In this CbC report, companies will be required to inform the IRS about controlling or controlled companies abroad and their operations with them and key aspects of the companies to cross-reference that information with the Country’s Tax Authorities that said company is established. In June 2016, the Standard for A in Tax Matters, edited in 1988, was ratified and is enforced in Brazil as from 1 January 2017.

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Country BulgariaPKF member firm PKF Bulgaria

Your contact Venzi Vassilev





3 CFCs• Introduction of CFC legislation

in Bulgaria.

• New amendments in the Bulgarian Corporate Tax Law have been made, introducing the CFC rule. The purpose is to restrain BG companies from shifting profits to jurisdictions with lower corporate tax rates and where the CFC does not carry on a substantial economic activity. The definition of a CFC is a non-resident entity or a PE abroad, whose profits are not subject to the Bulgarian Corporate Tax Act or are exempt from tax, and for which the following conditions are simultaneously fulfilled: a Bulgarian taxpayer owns, directly or indirectly, alone or together with related parties, 50% of the voting rights, shares, or income of the CFC; and the effectively paid corporate tax from the CFC is less than half the corporate tax that would have been paid if the profits were realised in Bulgaria. Legislation changes are currently voted in Parliament and are expected to take effect from 1 January 2019.


• Thin capitalisation rules apply in Bulgaria if the ratio of the company's liabilities towards its equity exceed 3:1. Interest expenses on bank loans are generally not subject to thin capitalisation, except in some specific cases.

• Bulgarian thin capitalisation rules will be entirely replaced by new interest limitation rules in accordance with which any excessive borrowing costs which exceed 30% of the taxpayer's EBITDA are non-deductible for corporate income tax purposes. The scope of the new interest limitation rules is broader than the scope of the current thin capitalisation rules and covers interest expenses on all forms of debt, other costs economically equivalent to interest and any other expenses incurred in connection with the raising of finance. Unlike the current Bulgarian thin capitalisation rules which limit the carrying forward of non-deductible borrowing costs to five years, there are no time limitations for carry forward under the new rules. This should allow the complete utilisation of interest costs incurred in relation to investment activities.

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• The Act on the Economic and Financial Relations with Companies Registered in Preferential Tax Regime Jurisdictions, the Persons Related to Them and their Beneficial Owners (the “Act”) entered into force on 3 January 2014. The Act imposes a prohibition for companies registered in preferential tax regime jurisdictions, and the persons related to them, to be directly or indirectly involved in the following activities: banking, insurance, pension & investment funds, mobile operators, mining, obtaining public procurement, concessions, public-private partnerships.

• Such companies are also disallowed to participate in privatisation transactions, as well as in companies with state or municipal ownership, in companies carrying out activities under the Independent Financial Audit Act, the Independent Valuators Act and the Renewable Energy Act, acquisition of state or municipal property, as well as ownership over land and forests from the state forest fund.

• The prohibition is also applicable to any persons related to those companies that are registered in preferential tax regime jurisdictions, including companies that have (in)direct control over such legal entities, as well as their subsidiaries.

n/a







• No specific action taken other than application of arm's length principle on related party transactions. n/a

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• The procedure and the forms to be used in filing CbC reports in Bulgaria as well as the related notification rules were approved on 31 October 2017, with the release of an Ordinance by the Bulgarian National Revenue Agency.

• The Ordinance sets out information to be filed in the CbC report and in the CbC notification filed by the taxpayers.

• Thus, if CbC reports should be submitted by the ultimate or surrogate parent company that is a tax resident of Bulgaria, the first CbC report for the fiscal year starting 1 January 2016 and ending 31 December 2016 should have been submitted before 31 December 2017 and exchanged within the EU administration by 30 June 2018.

• The filing deadline for the secondary reporting could be extended by one year (i.e. applying for financial year 2017 onwards).

n/a

12 Disclosure of aggressive tax planning • No specific action taken yet. n/a

13 TP – documentation• For Bulgarian tax purposes, TP documentation should not be filed mandatorily. However, such documentation

may be requested for a review during a tax audit. So maintaining a Master and Local file for the qualifying entities is recommended.

n/a



• Bulgaria is one of the 85 signatories of the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which was signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a



29



Country CameroonPKF member firm ACN & Co Certified Public Accountants and Registered Auditors

Your contact Office +237 233432533 / Mob +237 676548777 / +237 696859024





3 CFCs • No specific action taken yet. n/a

4 Interest deductions• Exchange of Control requires a declaration of the loan contract with the MoF. Once that is done, companies

are allowed to pay interest on loans received, even on intragroup loans.n/a




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• TP transactions must be justified by means of contracts and actual work done and the amount must not exceed 10% of profits before the deduction of the aforesaid charges.

n/a




13 TP – documentation • For Cameroon tax purposes, TP documentation should mandatorily be filed by 15 March on an annual basis. n/a



31



Country ChilePKF member firm PKF Chile

Your contact Antonio Melys



1 Digital economy

• Assignment of functions and attributions to a specialised office of the Internal Revenue Service, which includes the development of control strategies to mitigate risks in digital operations through any electronic means.

• Authority of the IRS to demand the use of technological means for tax control or traceability of digital commerce (Article 64ter Tax Code).

n/a

2 Hybrids• Legal requirement to deliver information through an affidavit on the trusts and other legal forms created

according to rules of foreign law, and recognition as a possible CFC (Article 14 E and 41 G Income Tax Law).n/a

3 CFCs

• The Tax Reform, in force since 2016, includes regulations that refer to "passive" income (interest, dividends and others) of entities qualified as CFCs, which must be subject to income taxes in the proportion corresponding to a Chilean taxpayer, even if they have not been received by said taxpayer (Article 41 G Income Tax Law). Taxpayers are required as well to file an affidavit (Form No. 1929) on investment, income and losses obtained abroad.

n/a


• The Tax Reform established new rules to determine the over-indebtedness with related companies from abroad, i.e. what exceeds three times the amount of capital, taking into account nearly all the liabilities for said calculation. The interest and all the expenses associated with the over-indebtedness incurred by the creditor will be subject to a single tax of 35% of the debtor's charge. Obligation to submit the affidavit Form 1930 with the corresponding information.

• On the other hand, interest and remuneration for services and other corresponding to related foreign companies, as well as the taxes that affect them, can only be deducted as an expense for tax purposes in the fiscal year they are paid.

n/a

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5 Harmful tax practices• No specific action taken yet. Eventual specific risk mitigation plans through the application of the IRS legal

means.n/a

6 Prevent treaty abuse• No specific action taken yet. Eventual specific risk mitigation plans through the application of the Chilean IRS

legal faculties, considering the rules in this respect included in the Conventions.n/a

7 PE status• No specific action taken yet. Possible specific risk mitigation plans through the application of the Chilean IRS

legal faculties, considering the current tax rules.n/a

8 TP - intangibles• No specific action taken yet. Possible specific risk mitigation plans through the application of the Chilean IRS

legal means.n/a


• No specific action taken yet. Nevertheless, new provisions on TP, include reorganisations and corporate or business restructurings when there has been a transfer abroad of goods or activities likely to generate taxable income in the country.

n/a




• Several double tax treaties concluded by Chile have provisions regarding the exchange of information. Likewise, there are several countries that have concluded treaties allowing the exchange of information only. In order to fulfil the CRS standard in this respect, the Chilean IRS requires financial institutions to submit an annual affidavit on financial accounts related to persons having their tax residence abroad (Article 62ter Tax Code). This information will be shared with 91 countries, according to the Multilateral Convention on Administrative Assistance (MAAT).

n/a

33





• The changes introduced in the Tax Code establish rules of broad application tending to prevent the avoidance, reduction or deferral of taxes by means of abuse of juridical forms and simulation. Considering the broad means of the Chilean IRS to qualify an operation as an elusive one, an Anti-avoidance Committee has been set up to assist the Director of the Chilean IRS concerning elusive schemes and related matters. Also, the Chilean IRS publishes cases on a regular basis which are considered aggressive tax planning. Taxpayers can ask the IRS’ opinion on whether a particular transaction qualifies as an elusive tax scheme. Likewise, large companies and large taxpayers must file the affidavit N°1913, of Global Tax Characterisation, containing qualitative information on their processes and operations.

n/a

13 TP – documentation• Groups of multinational companies with a consolidated turnover of at least EUR 750 million have the obligation

to submit the affidavit 1937 CbC report. It must be presented by the taxpayers together with the affidavit 1907 regarding TP.

n/a



• Chile is one of the 85 signatories of the MLI. The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a

34



Country ChinaPKF member firm PKF China

Your contact Allan Jiang / Rachel Zhang



1 Digital economy

• The State Administration of Taxation and the General Administration of Customs jointly issued a circular CaiGuanShui (2016) No. 18, which stipulates that tariffs and import value-added tax are to be levied on cross-border e-commerce transactions via online shopping platforms and express delivery companies.

• China E-commerce Law will take effect as from 1 January 2019, date on which E-commerce operators shall apply for relevant permits and pay taxes according to China tax laws and regulations.


3 CFCs

• China has already included CFC regulations in the Enterprise Income Tax Law and its Detailed Implementation Regulations.

• From 2014, China requires resident enterprises to report outbound investment and income along with the annual corporate income tax filing returns.

• In 2015, a draft edition of the "Special Tax Adjustment Implementation Measures" was issued, in which the rules of controlled foreign companies are elaborated upon. However, it has not yet been officially released and it may be released in the near future.

• China will launch a new Individual Income Tax Law on 1 January 2019, where CFC regulations are also introduced.


• The Enterprise Income Tax Law and the Detailed Implementation Regulations stipulate that the interest expense incurred in excess of the prescribed standard by Enterprises from their affiliates may not be deducted when calculating the taxable income.

• The prescribed debt to equity ratio of financial enterprises is 5 to 1, and the ratio for other enterprises is 2 to 1.

n/a

5 Harmful tax practices• In 2016, China has issued Announcement of the State Administration

of Taxation [2016] No. 64 that a taxpayer's APA information will be voluntarily exchanged with overseas tax authorities.

• China tax authorities may participate in more programs and may promote new policies to enhance tax transparency in the future.

35




6 Prevent treaty abuse

• In 2018, China has newly issued Announcement of the State Administration of Taxation [2018] No. 9 to define the beneficiary owner criteria to benefit from tax treaty treatment.

• Some of the tax treaties recently signed or updated by China have introduced limitation on benefits (LOB) clauses, primary purpose tests (PPTs), and triangular case rules for permanent establishments.

• China tax authorities may continue to issue new regulations to prevent treaty abuse or treaty shopping.

7 PE status • Some newly revised double tax treaties have adopted the BEPS standards for permanent establishments.

• More and more double tax treaties may be revised to adopt the permanent establishment standards promoted by BEPS.

8 TP - intangibles

• China has already issued several new circulars to regulate transfer pricing arrangements as follows:

• Announcement of the State Administration of Taxation on Relevant Matters relating to Improvement of the Filing of Related-Party Transactions and the Management of Contemporaneous Documentation [2016] No. 42;

• Announcement of the State Administration of Taxation on Improving Matters related to the Administration of Advance Pricing Arrangements [2016] No. 64;

• Announcement of the State Administration of Taxation on Issuing the Administrative Measures for Special Tax Adjustment and Investigation and Mutual Consultation Procedures [2017] No. 6;

• For intangibles, China has taken the viewpoint that intangible returns should be allocated to the entity performing DEMPE functions, but the tax authority also gives additional emphasis to local promotion as being an important IP function.

• China tax authorities also request to evaluate the location savings impact.

• In 2015, a draft edition of the "Special Tax Adjustment Implementation Measures" was issued. This is a comprehensive guideline on special tax adjustments. However, not all contents of the draft have been issued. The unreleased contents may be issued in the near future.

9TP – capital related high-risk transactions • See action point 8. • See action point 8.

10TP – other high-risk transactions • See action point 8. • See action point 8.

11 BEPS data collection• China tax authorities have launched Golden III tax system that contains more sophisticated

functions and will be linked with all industries and tax administration areas to enhance big data analysis to improve the tax administration.

• China tax authorities are building up a comprehensive intelligent tax administration system that will definitely benefit the BEPS data collection, analysis and administration.

36




12 Disclosure of aggressive tax planning • China has not yet set up the statutory disclosure regulations.

• China tax authorities are revising the Tax Administration Law to include the disclosure requirements embedding the BEPS action plan.


• In June 2016, China tax authorities issued new transfer pricing (TP) compliance requirements.

• According to China TP regulations, transfer pricing documentation includes a master file, local file, and special issue file. The thresholds for the preparation of TP documentation are listed below.

• If the company meets either of the following criteria, it shall prepare a Master File;

- Have cross-border related party transactions, and belong to a group which has prepared the master file, or

- The total annual related party transactions exceed RMB 1 billion.

• For the Local File, the thresholds for preparing local file depend on the types of related party transactions, which are listed below:

- RMB 200 million for tangible assets transfer (in the case of tolling manufacturing, the total amount in the annual customs record including raw material should be taken into account);

- RMB 100 million for financial assets transfer;

- RMB 100 million for intangible assets transfer; and

- RMB 40 million for other related party transactions in total.

• The special issue file is required for the taxpayers who are engaged in a cost sharing agreement, or fall within the thin capitalisation threshold.

• The transfer pricing compliance regulations also require the submission of Country-by-Country reports if a Chinese resident company is the ultimate holding company of the group and the consolidated revenue exceeds RMB 5.5 billion or it is nominated as the reporting entity by the group.

• China tax authorities may ask taxpayers to provide more information in the future to fully evaluate related party transactions. In the meanwhile, tax authorities are strengthening the data analysis system to identify potential risks arising from TP arrangements.

37




14 Dispute resolution

• China has issued the following two circulars for the implementation of BEPS action plans:

• Announcement of the State Administration of Taxation on Improving Matters related to the Administration of Advance Pricing Arrangements [2016] No. 64;

• Announcement of the State Administration of Taxation on Issuing the Administrative Measures for Special Tax Adjustment and Investigation and Mutual Consultation Procedures [2017] No. 6.

• China tax authorities are focused on steadily promoting the work of APA negotiation and deeply engaging in BEPS projects advocated by G20.


• China is one of the 85 signatories to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral double treaty agreements. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

• In May, 2017, the State Administration of Taxation, Ministry of Finance, People’s Bank of China, China Banking Regulatory Commission, China Securities Regulatory Commission and the China Insurance Regulatory Commission jointly announced and issued the Administrative Measures for Due Diligence on Non-resident Financial Account Information in Tax Matters stipulating that financial institutions are required to comply with the due diligence procedures prescribed in the measures to identify the tax residency of financial account holders, to collect and record reportable information.

• In November, 2018, China has signed the Agreement on Country-by-Country Reporting Information Exchange by Multilaterally Competent Tax Authorities to automatically exchange Country-by-Country reporting.

• China will participate more and more in information exchange systems to improve global tax transparency and implement the BEPS actions plan.

38



Country ColombiaPKF member firm PKF Colombia

Your contact Luisa Fernanda Daza Vargas






4 Interest deductions • No specific action taken yet. n/a




39




8 TP - intangibles• a) Commodity transactions: The operations to which the "uncontrolled comparable price" is applied are established,

since section 1 of article 260-3 of the Tax Code is modified, establishing the specific treatment that will be given to the acquisition operations of used bodily assets, and is established as the most appropriate method for commodity operations, for the purpose of establishing the price of full Competition in these transactions, which will be determined based on comparable transactions made between independent or by reference to quoted prices. It is included as a relevant factor of these transactions, the precise date agreed by the parties to fix the commodity. This agreed date for the pricing of the commodity must be supported by reliable documents, for example contracts, offers or other documents that establish the terms of the agreement and that may constitute reliable proof. In turn, it is necessary that the agreements be registered under the terms and conditions established by the National Government.

• b) CBC report: The recommendation of the BEPS Plan is adopted, which suggests the preparation of "CbC" reports, which will provide the Tax Administration with an overview of the operations of transnational companies. The foregoing was established in article 108 of Law 1819 of 2016, through which article 260-5 of the Tax Code was modified, in relation to supporting documentation, which must include a master report with the relevant global information of the transnational group, as well as a report on the global allocation of income and taxes paid in each country, along with certain indicators related to economic activity global level. This obligation applies to Colombian companies that control multinational groups, and to companies designated by the parent of the group as responsible for submitting the report. The "CbC" report must be sent in the means, formats, terms and conditions established by the National Government, and failure to comply with this obligation will result in the application of the sanction provided for in Article 651 E.T. With this measure, the Tax Administration will be able to gather more information from multinationals. Previously, such information was limited only to the operations that were carried out on Colombian territory. This report will allow establishing if revenues are being channelled unduly to low-taxed jurisdictions and identifying the group's global income.

• c) Preferential tax regimes (tax havens): A modification to article 260-7 of the ET was introduced, so that tax havens can be considered not only as countries that meet the criteria indicated in the standard, but also as a regime’s preferential taxpayers that meet at least two of the criteria provided for that purpose. It also includes a new criterion to be considered a tax haven, applicable to regimes to which only non-residents of the jurisdiction in which the corresponding preferential tax regime operates (ring fencing) can have access.

• d) Exclusions in the limitations of deductions: Article 260-8 of the Tax Code is modified to include the exception of the application of the limitation of article 124-2 ET, referring to payments made to non-cooperating jurisdictions, and paragraph 2 of article 143 of the ET, referring to the deduction for amortisation of intangible assets acquired from related parties.

• Decree 2120 of 2017



40







• This report contains revised standards for TP documentation incorporating a master file, local file, and a template for CbC reporting of revenues, profits, taxes paid and certain measures of economic activity. The revised standards used will require taxpayers to articulate consistent TP positions and will provide tax administrations with useful information to assess TP and other BEPS risks, make determinations about where audit resources can most effectively be deployed, and, in the event audits are called for, provide information to commence and target audit enquiries. CbC reports will be disseminated through an automatic government-to-government exchange mechanism. The implementation package included in this report sets out guidance to ensure that the reports are provided in a timely manner, that confidentiality is preserved and that the information is used appropriately, by incorporating model legislation and model Competent Authority Agreements forming the basis for government-to-government exchanges of the reports.

• Decree 2120 of 2017.



• Colombia is one of the 85 signatories of the MLI. The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a

41



Country Costa Rica PKF member firm PKF Costa Rica

Your contact Fernando Murillo Marchiani










42













• Costa Rica established the obligation for taxpayers to submit documentation related to local and master archives. The mechanism to present this documentation is to be defined (Resolution on Documentation of Transfer Prices DGT-R-16-2017). On 11 January 2018, Resolution DGT-R001-2018 was issued on the provision of information for companies resident in Costa Rica for the AEOI, according to the CbC report.

n/a



• Costa Rica is one of the 85 signatories of the MLI. The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a

43



Country CroatiaPKF member firm PKF TAX CONSULTING ANTIČIĆ d.o.o.

Your contact Diana Anticic - +385 9140 00333




2 Hybrids

• The Croatian tax regulations stipulate that the rights related to tax cuts, exemptions, tax exemptions and tax deductions or reductions in tax liability may not be used by the taxpayer for arrangements or a range of non-authentic arrangements.

• Arrangements (or series of arrangements) are not considered genuine if it is established that the taxpayer has set them up for the exercise of the aforementioned rights as a principal purpose or as one of the main purposes.

n/a

3 CFCs

• Croatian tax regulations have implemented provisions aimed to combat tax evasion and transfer of state profits. This refers to the calculation of withholding tax that Croatian companies have to account for in the following cases: (i) payment of profits (dividends) to legal entities at a rate of 12%; (ii) license at a rate of 15%, (iii) interest at a rate of 15%, (iv) market research, tax and business consulting services and auditing services, paid to foreigners at a rate of 15% or (v) services not listed above, but paid to legal entities from countries considered as tax haven at a rate of 20%.

• The ATAD, article 7 and the CFC rules are part of Croatian legislative proposals that were accepted on 28 September 2018. The CFC rule about corporate tax of the PE or entity will be effective from 1 January 2019.


• Interest paid on loans is not recognised for tax purposes (to the payer, domestic company) if received from a shareholder or a member of a company holding at least 25% of the shares or equity or voting rights of the taxpayer and if at any time in the taxable period these loans exceed four times the amount of the shareholder’s or a member’s share in the capital or voting rights.

• Croatia accepted ATAD I on 28 September 2018 related to the interest limitation rule. The changes in the national regulations will be effective on 1 January 2019. Changes are related to the deduction of exceeded loan expenditures up to 30% of EBITDA or 3 million EUR.

44






7 PE status• The definition of a PE for Croatian tax purposes generally follows the wording of article 5 of the OECD Model

Tax Convention.n/a


9 TP – capital related high-risk transactions • No specific action taken yet. n/a

10 TP – other high-risk transactions • No specific action taken yet. n/a

11 BEPS data collection• Regulation on CbC reports, Law on administrative cooperation in the field of taxation (NN 115/16) and the

Rulebook on AEOI in the field of taxation (NN 18/17) have been in force since 2017.n/a


• In 2017, the Rulebook on AEOI in the area of taxation was adopted and applies to EU Member States. Croatia also applies the AEOI within the framework of Directives 2003/48 / EC and Directive 2011/16 / EU.

• Croatia applies the Convention on mutual administrative assistance in tax matters in relation to VAT, Income Tax, Profit Tax and Real Property Tax.

n/a


• Croatian taxpayers are required to have the appropriate documentation (TP study) that provides data and information about affiliated persons and business relationships with those persons, the methods used to determine comparable market prices and the reasons for choosing specific methods.

• Since 2017, a regulation has been passed that enables the conclusion of the previous TP agreement between the taxpayer and the Tax Administration.

n/a

45





• As from 1 January 2015, Croatia applies the EU Arbitration Convention on TP. The purpose of the Convention is to improve the procedures of the competent authorities in solving such cases so that if the competent authorities (tax authorities of a particular country) cannot resolve the double taxation case within two years, the Advisory Committee renders its opinion in the case at hand, which will be binding.

n/a


• Croatia joined FATCA and CRS agreements which are aimed to combat tax evasion through the AEOI between the countries.

• Croatia is one of the 85 signatories of the MLI. The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a

46



Country CyprusPKF member firm PKF Savvides & Co Ltd

Your contact Nicholas Stavrinides




2 Hybrids• Cyprus approved the July 2014 amendment of the EU PSD disallowing the benefits of the Directive

(in essence participation exemption relief) if the “dividend income” gave rise to a “tax deduction” in the source country.

• On 29 May 2017, the EU Member States reached agreement on the amendment of the original ATAD. The new Directive includes the coverage of hybrid mismatches, between EU and non-EU member states.

• The implementation into domestic law has to take place before 31 December 2019.

3 CFCs• Cyprus has CFC rules saying that overseas dividend income is only tax-exempt in Cyprus if the

dividend distributing company derives its income (in)directly from non-investment activities or if substantially low tax has been paid on those profits.

• The implementation of the EU ATAD which includes additional CFC Legislation requirements is required before 1 January 2019.

4 Interest deductions• Cyprus has existing interest expense restriction criteria where borrowings exist to finance non-

business assets. As a general rule, all expenses occurred wholly and exclusive for the trade are tax-deductible.

• The implementation of the EU ATAD, which includes additional measures to restrict interest deductions is required before 1 January 2019.

47





• The Cyprus Parliament voted on 14 October 2016 a number of amendments to the Cyprus IP Box regime in order to fully comply from now on with the relevant OECD recommendations relating to BEPS Action 5.

• The amendments do not materially affect the existing IP tax regime, which will be valid until 30 June 2021, nor do they alter the current effective tax rate of 2.5%. They actually introduce a new IP regime, which is based on the Modified Nexus Approach (see New Cyprus IP Box Regime (c) below) in calculating the amount of profits which will be subject to the 80% exemption.

• They concentrate on the application of this nexus approach and provide guidance on what constitutes a qualifying IP asset, qualifying income and qualifying expenditure. They further enhance the Cyprus position as a jurisdiction for R&D as businesses may benefit from the preferential regime within the framework agreed internationally.

n/a

6 Prevent treaty abuse • No specific action taken yet.• The MoF will welcome specific

anti-abuse measures in new DTT negotiations.

7 PE status • No specific action taken yet other than the definitions followed in OECD model on DTTs. n/a

8 TP - intangibles• No specific action taken yet other than application of arm’s length principle on related party

transactions and the actions taken referred to Action point 5.n/a


• No specific action taken yet other than application of arm’s length principle on related party transactions.

n/a


• The MoF announced that the acceptable taxable net profit margins on back-to-back financing arrangements will be set through TP rules and submission by the taxpayer of TP documentation that should be prepared by an independent advisor. A circular was issued for which the TP rules are consistent with the OECD guidelines.

n/a




48





• Cypriot MoF issued a Decree pursuant to Article 6 (16) of Assessment and Collection of Taxes Law on CbC Reporting (the Decree). The Decree is in accordance with an EU Directive of 25 May 2016 requiring all EU Member States to implement a CbC Reporting obligation in their national legislation in accordance with the recommendations on CbCR of action point 13. All Cypriot tax resident entities that are part of an MNE Group with consolidated group revenue of EUR 750 million and above will need to comply with the CbCR requirements for financial years starting on or after 1 January 2016.

n/a



• Cyprus is one of the 85 signatories of the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a



49



Country Czech RepublicPKF member firm APOGEO, s.r.o.

Your contact Jaroslava Hanková




2 Hybrids • The implementation is expected in 2020. The rules are in the consultation stage. n/a

3 CFCs• Revenues of a CFC are taxed pursuant to the Czech tax legislation if the CFC does not perform substantial

economic business and a tax similar to the corporate income tax of the CFC is lower than one half of the tax which would be determined in the Czech Republic. It is supposed to be in force from 1 January 2019.

n/a


• Czech income tax law specifies the rules for interest deductions between related parties

- Thin capitalisation rules exist in the Czech Republic: - The thin capitalisation rules apply to related-party loans only and the test captures not only interest but

‘financial costs’ on loans as well; - The debt-to-equity ratio for related-party loans is 4:1 (6:1 for financial services industry); - Interest on profit-participating loans is not tax deductible.

• Change in the tax legislation specifying the rules for interest deduction will be implemented in 2019. The legislative process will begin in 2018.

• Apart from the thin capitalisation rule, an additional interest limitation rule is in place:

- The part of financial costs is non-deductible if it is higher than 30% of EBITBA or 80 million CZK; - All financial costs are involved into the calculation (not just interest paid to related parties); - For calculation purposes, all financial costs are reduced by financial interests, which are non-deductible

according to the thin capitalisation rule, and reduced by all financial revenue.

• It is supposed to be in force from 1 January 2019.

n/a

50




5 Harmful tax practices • The Czech tax administration is obliged to exchange APAs related to cross-border transactions. The exchange takes place twice a year between the EU Member States.

n/a


• Czech domestic tax law includes a clause which prevents the benefits of DTTs or favourable tax regimes to take effect. Upon mutual agreement, the competent authorities may deny the benefits to any person, or to any transaction undertaken by such a person, if in their view the main purpose of the creation or existence of such a person was to obtain the latter benefits that would otherwise not have been available. The rule is applied in administrative procedures and practice of the court.

n/a


8 TP - intangibles• Since 2015 taxpayers are obliged to file a separate attachment to the income tax return to declare selected

transactions with related persons.n/a


• Since 2015 taxpayers are obliged to file a separate attachment to the income tax return to declare selected transactions with related persons.

n/a


• Since 2015 taxpayers are obliged to file a separate attachment to the income tax return to declare selected transactions with related persons. Scrutiny on transfer prices has been increased.

n/a



• New TP requirements. n/a

13 TP – documentation• TP documentation should not be filed mandatorily but it is recommended. Since 2015 taxpayers are obliged to

file a separate attachment to the income tax return to declare selected transactions with related persons.n/a



• MLC tax audit under Council Directive.

• The Czech Republic is one of the 85 signatories of the MLI. The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a

51



Country DenmarkPKF member firm PKF Munkebo Vindelev

Your contact Kasper Vindelev



1 Digital economy • No specific action taken yet.

• The Danish Government will develop a digital reporting system which enables digital platforms and payment solutions to submit the information of the users' income to the Danish tax authorities.

2 Hybrids• Denmark has approved and implemented the July 2014 amendment of the EU

PSD disallowing the benefits of the Directive (in essence participation exemption relief) if the “dividend income” gives rise to a “tax deduction” in the source country.

n/a

3 CFCs

• No specific action taken lately. However, in January 2016 the Legal Guide 2016-1 from the Danish tax authorities was issued, providing information on the Danish CFC rules. It is required for Danish companies to include income from foreign and domestic subsidiaries and foreign PEs if the Danish parent company owns more than 50% of the capital or has more than 50% of the voting rights in the PE or subsidiary, if more than half of the subsidiary’s taxable income is from passive forms of income such as interest, royalty, capital gains etc. and if the subsidiary’s assets generating the passive income are more than 10% of its total assets.

• Denmark will implement a new legislation regarding taxation of CFCs according to the EU directive.

• The implementation of the new CFC rules will have effect on income year beginning on 1 January 2019 or later.


• No specific action taken lately. However, Denmark has existing interest deduction restrictions. Its thin capitalisation rules follow three main criteria:

- A debt-to-equity ratio of 4:1; - An asset-based rule that applies in relation to financing costs that remain after

the thin cap limitation; and; - An EBIT-based rule which restricts the deductibility of financing costs which

remain following the thin cap-test and the asset-based rule to an amount equal to 80% of the Danish company’s/tax group’s taxable EBIT income.

• The Danish Government has introduced new legislation which contains several changes to the Danish rules of international taxation. One of the changes relates to taxation of interest paid to a Danish creditor from a foreign debtor. The new Danish rules will follow the current EU rules. If the legislation is adopted, it will have effect from income year 2018.

52




5 Harmful tax practices • No specific action taken yet. • This agreement contains actions for increased

advisory responsibility.


• Denmark has implemented legislation to meet action point 6 to prevent treaty abuse by introducing a new international anti-abuse tax rule (GAAR), which denies tax treaty and EU tax directive benefits in case of deemed abuse. However, if the arrangement or transaction(s) is consistent with the contents and purpose of the relevant article, the taxpayer can still be granted the benefit.

n/a

7 PE status • No specific action taken yet.

• The government has signed the MLI in June 2017 with reservation for almost all regulations. A governmental law proposal regarding enforcement of these regulations is expected, but has not yet been introduced.

8 TP - intangibles • Denmark’s TP rules generally meet the 2010 OECD TP Guidelines.• When the OECD’s TP Guidelines are updated, the

Danish rules will follow.

9 TP – capital related high-risk transactions • See action point 8. • See action point 8.

10 TP – other high-risk transactions • See action point 8. • See action point 8.

11 BEPS data collection• This agreement contains a statement that Denmark will begin exchanging CRS-

data about financial accounts as of September 2017 and CbC reporting as of 2018.

n/a


• No specific action taken yet.• This agreement contains actions for increased

advisory responsibility as well as other planned actions against aggressive tax planning.

53




13 TP – documentation• Denmark has implemented legislation including requirements regarding a Master

File, Local File and for MNE’s to file a CbC report.

• In December 2017 Denmark implemented legislation which requires written TP documentation to be fully completed by the deadline for filing the company’s tax return. Previously, the TP documentation was also expected to be in place by the time the company’s tax return was filed, but it was not a legal requirement. The company had 60 days to provide the TP documentation, if requested by the authorities. The new legislation is valid from 1 January 2019 (FY 2018).



• MLC tax audit under Council Directive.

• Denmark is one of the 85 signatories of the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a

* In May 2017, the Danish government signed an agreement with a majority of other parties in the Danish Parliament about strengthened efforts against international tax evasion.



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Country EgyptPKF member firm PKF Rashed, Badr & Co.

Your contact Hany Rashed



1 Digital economy• Issuing VAT.

• Issuing new investment law.

• VAT was introduced as from 1 September 2016 at a 13% rate. The rate was increased to 14% as from 1 July 2017.

• The new investment law was issued and its executive regulations apply as from 1 November 2017.


3 CFCs• The new investment law grants the ability to transfer profit distributions after deducting

the dividend tax that ranges from 5% to 10%.n/a

4 Interest deductions• No specific action taken lately However, Egypt has existing interest deduction

restrictions. Its thin capitalisation rules follow main criteria:

• A debt-to-equity ratio of 4:1.

n/a

5 Harmful tax practices • No specific action taken yet. • Egypt has concluded many DTTs.

6 Prevent treaty abuse• There are no procedures to prevent the inclusion of benefits into agreements and treaties.

• The dividend tax is applicable as from 2015.n/a


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8 TP - intangibles • There is tax legislation regulating transactions between related parties. n/a









• On 23 October 2018, the tax authorities published on their website the new TP guidelines. According to these, all Egyptian tax resident entities that are ultimate parent entities of a multinational enterprise group with annual consolidated group revenue equal to or exceeding EGP 3 billion (approximately EUR 145 million) will have to prepare a CbC report for financial years starting on or after 1 January 2018. For ultimate parent entities that are non-resident for tax purposes in Egypt, the group revenue threshold of EUR 750 million will apply. The due date for the submission of the CbC report will be by the end of the reporting fiscal year. However, for the first time the deadline will be within 12 months after the end of the reporting fiscal year.

• An Egyptian parent company will also need to prepare a transfer pricing master file that the parent company and group members will use to support transfer pricing compliance requirements around the world.

• The local file should be prepared at the local entity level and is required to be submitted to the tax authorities within two months following submission of the annual corporate tax return.

n/a

14 Dispute resolution • DTTs may contain provisions for dispute resolution between companies, if any. n/a


• Egypt is one of the 85 signatories of the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a



56



Country EstoniaPKF member firm PKF Estonia

Your contact Rein Ruusalu





3 CFCs • There is no CFC legislation in Estonia. n/a





57















• Estonia is one of the 85 signatories of the MLI. The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a

58



Country FrancePKF member firm Hedeos – law firm

Your contact Stéphane Michoud



1 Digital economy

• A certain number of taxes do apply to certain digital services already e.g. online videos, (recently extended to services such as Youtube – (tax base is the advertising revenue from France) and certain electronic services provided by telecoms operators.

• France has proposed to introduce a digital services tax from 1 January 2019 to cover advertising revenues, platforms and the resale of personal data.

• France implemented measures to treat the country of consumption as the place of supply of digital supplies for VAT purposes with effect from 1 January 2015 – EU suppliers - and since 2003 for non-EU suppliers.

• Stricter controls of low value imported goods (B²C) to ensure compliance – VAT.

• Reporting requirements on lodging platforms increased and from 2019 obligation to report revenues to the French authorities of platform users – hosts.

• Joint liability by platforms for VAT due by suppliers of goods/services to non-taxable persons – from 1 January 2020.

- The liability that falls on the platform only arises after the following stages are completed.

- The administration contacts the platform and informs him that a user (e.g. a property host) of the platform is not, according to the FTA, correctly accounting for his (French) VAT liabilities;

- The platform must inform the user of his liabilities (and the FTA of the action taken) – within one month; and

- If no action is taken by the user to regularize his situation, the platform operator must remove him from the platform – within one month;

- If the platform has not informed the user or removed him as above the platform becomes jointly liable for the VAT due by the user.

n/a

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2 Hybrids • French tax law provides that the benefit of the PSD regime does not apply to hybrid instruments. n/a

3 CFCs

• CFC rules apply to resident companies that directly or indirectly hold a participation of more than 50% in a foreign legal entity or PE that is established or incorporated in a country with an effective tax rate that is at least 50% lower than that of France.

• EU companies are outside the scope of the CFC rules (unless the structure was put in place to avoid tax), and the CFC rules also may not apply to a CFC that is outside the EU in certain circumstances.

• An anti-abuse provision reduces the participation threshold to 5% where more than 50% of the shares in the foreign entity are owned by French companies or by foreign entities directly or indirectly controlled by a French company.

• A similar set of rules applies to individuals.

n/a


• As a general rule, tax deduction of interest is limited to the average bank interest rate for corporate loans with a duration of more than 2 years; or to the higher market rate.

• Other traditional limitations on the deductibility of interest apply only to specific, potentially abusive transactions. The rule generally known as the Charasse amendment limits the deductibility of interest on debt incurred to acquire related party shares followed by the inclusion of both entities in the same tax group. French tax law disallows an interest deduction on a loan granted by an affiliated company if the interest is not subject to a tax at the level of the lending company that is equal to at least 25% of the tax that would have been due under the normal French rules.

• Interest expenses of a French company in relation to intragroup loans and also third-party loans guaranteed by an affiliated company are not fully tax deductible if three ratios are cumulatively exceeded in the relevant fiscal year (when excess interest equals max EUR 150,000):

- The debt/equity ratio: the average amount of intragroup loans must not exceed 1.5 times the amount of the net equity (or the amount of share capital if this is a higher amount) of the French borrowing company;

- The earnings ratio: the amount of interest expenses relating to qualified loans must not exceed 25% of the current-year EBITDA;

- The interest income test: the amount of interest expenses relating to qualified related party loans must be less than the amount of interest income received by the company from related entities.

• Interest on shareholding loans is only deductible if the decisions were taken in France.

• If accrued interest exceeds EUR 3 million, tax deduction is capped at 75% of the net interest charges.

n/a

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• A French resident having a min. 10% shareholding or having operations with an entity located in a NCST is taxed on that entity’s income, even though the revenue has not been distributed or effectively received by the French resident.

• France is amending its IP regime (see Finance Law 2019).

• Sums received by a non-resident for services rendered by a French resident or for services rendered in France by a non-resident are taxable in France in the hands of the service provider if certain conditions are met.

• Not at arm’s length payments are disallowed if the beneficiary is subject to a privileged fiscal regime i.e. if it is not subject to taxes on profits or income or if it is subject to a tax rate lower than 50% of the French rate on the same income.

• Dividends, interest, royalties and service fees paid to companies located in a NCST may be subject to a 75% WHT.

Amendments to Patent Box regime in progress

6 Prevent treaty abuse• Some tax treaties with France include a GAAR rule while others contain a specific LoB rule, or PPT rules.

• France apples PPT with respect to anti-abuse rules.n/a

7 PE status • Specific rules exist to compute he duration of a “construction site” PE and introduction of a service PE. n/a

8 TP - intangibles • No specific action taken since current TP rules should suffice. n/a




• All French entities with turnover or gross assets on the B/S exceeding EUR 400 million, or

• With a >50% direct or indirect subsidiary meeting this threshold are subject to the updated French TP documentation requirements.

• This includes the obligation to disclose foreign tax rulings to the French tax ruling authorities.

n/a


• The French tax administration has posted an updated list of “abusive” (and in certain cases fraudulent) practices or arrangements on its website.

n/a

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• All French entities with turnover or gross assets on the B/S exceeding EUR 400 million, or with a >50% direct or indirect subsidiary meeting this threshold are subject to the updated French TP documentation requirements.

• Parent companies of multinational groups with annual revenue exceeding EUR 750 million are required to file a CbC report within 12 months following the end of the fiscal year. Failure to file this report would be subject to a EUR 100,000 penalty.

• The tax administration in France would then transmit the CbC reports to other countries where the group has its operations, via an information exchange mechanism provided for by the DTTs, under the condition of reciprocity.

• The CbC reporting requirement would also apply to French subsidiaries of MNEs whose “head company” is established in a country or territory that does not share CbC reports with France.

The CbC disclosure might be made public.

14 Dispute resolution • A dispute resolution rule is included in the majority of the French DTTs. France subject to Peer Review, meeting all applicable terms of reference.

n/a


• France is one of the 85 signatories of the MLI. The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies. France adopted the MLI in July 2018 and submitted it to the OECD on 26 September.

Adopted 12 July 2018 and enters into effect from 1

January 2019

BEPS related cooperationEngagement by Business Community

• 11 public consultations held on the discussion drafts before the publication of the 2015 BEPS reports;

• French business community including MEDEF actively engaged; on transfer pricing in particular.

Support to developing countries

• France supports activity with African countries; including through its participation in regular Regional Meetings of the Inclusive Framework on BEPS in Africa;

• France involved in Tax Inspectors Without Borders (TIWB) programmes with Cameroon, Congo, Senegal;

• Close partnership with the CREDAF regional tax organization supporting francophone developing countries.

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Country GermanyPKF member firm PKF Fasselt Schlange

Your contact Wolfgang van Kerkom



1 Digital economy • No specific action taken yet.

• German politics aims to install a long-term global solution, rather than an EU-solution. However, focus should be made on profit shifting, first.

2 Hybrids

• Applying the correspondence principle, Germany installed a set of effective linking rules granting tax exemption of dividend income only if there is no deductibility in the state of source and vice versa, tax deductibility of interest expenses and losses from tax group companies are only granted if there is no deductibility in the source state.

• The same applies to the tax deductibility of interest expenses within transparent structures.

• Implementation of a general clause into domestic tax law stipulates a non-deductibility of expenses, if the corresponding income is not subject to tax for the recipient.

3 CFCs

• The German CFC regime has been in existence for decades. It is in principle applicable if more than 50% of the shares in a foreign entity are controlled by German residents and the income of the entity qualifies as passive and is taxed below an effective rate of 25%. The CFC regime would need some modernisation to be in line with the final OECD report.

• The Foreign Tax Act (AStG) will be assessed on whether there is a need to amend it. The modernisation of the Act is deemed necessary by the German authorities.

4 Interest deductions• The German interest barrier regime comprising a de minimis threshold, an EBITDA based

limitation and carry forward regulations has proved to be an effective instrument in preventing base erosion through interest expenses.

n/a

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• The legal basis has been implemented to adopt an ordinance on the obligation to grant transparency among tax administrations of EU member states by AEOI on tax rulings and APAs.

• AEOI with OECD member states is based on the bilateral Tax Treaties with Germany or on the Convention on Mutual Administrative Assistance in Tax Matters.

• In Germany, there is no preferential IP regime, except for tonnage tax for domestic shipping companies.

• The existing rules regarding “transfer of functions” make it difficult to transfer valuable assets such as IP out of Germany.

n/a

6 Prevent treaty abuse• Limitations to Treaty Benefits in case of treaty shopping and other situations are stipulated in

national German provisions.

• Germany seeks to install LoB, switch-over and subject-to-tax clauses in treaties.

n/a

7 PE status • German tax law already addresses the issue of artificial avoidance of a PE.• Definition of PE under national law will

be reviewed.

8 TP - intangibles • Tight scrutiny of TP under existing German rules and regulations in tax audits. n/a

9 TP – capital related high-risk transactions • Tight scrutiny of TP under existing German rules and regulations in tax audits. n/a

10 TP – other high-risk transactions • Tight scrutiny of TP under existing German rules and regulations in tax audits. n/a


• The German Federal Council (Bundesrat) approved the Combating Tax Evasion Law, obliging tax subjects to disclose detailed and far reaching facts relevant for potential taxation.

• At national level, certain BEPS relevant data is collected and evaluated by Federal Central Tax Office.

n/a

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12 Disclosure of aggressive tax planning • No specific action taken yet.

• Under review by the federal government.

• It is discussed whether tax planning models should be disclosed to the German tax authorities (i.e. before implementing or when filing the tax returns).


• The legal basis to adopt an ordinance on the obligation to document TP in a Master and a Local File has been implemented.

• CbC Reporting obligation is implemented: it has to be filed annually and by 31 December 2017 for the first time.

• TP Documentation Ordinance including details on Master and Local files is in the legislative procedure.



• Germany is one of the 85 signatories of the MLI. The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

• Implementation into German law is expected soon.

65



Country GreecePKF member firm PKF Euroauditing SA

Your contact Andreas Pournos / George Starakis



1 Digital economy• No specific action taken yet. The primary legislative source is the VAT regulation with regard to e-commerce

transactions.n/a

2 Hybrids• Greece has not yet adopted the amendment of EU Directive 2016/1164. The deadline for adoption is common

to all member states (31 December 2019, extended to 31 December 2021 for specific hybrid provisions).n/a

3 CFCs• Greece has put in place rules to restrict profit shifting, i.e. defining quantitative and qualitative criteria to

quantify taxable non-distributed income. However, the exact application of the rules remains problematic.n/a


• Greece has put in place rules to restrict profit shifting, i.e. defining quantitative and qualitative criteria to quantify taxable non-distributed income with regard to minimum percentage ownership and minimum retention period of investments. Greece has transposed into national legislation the EU Directive 2011/98 as amended by EU Directive 86/2014 and EU Directive 2015/121.

n/a

5 Harmful tax practices• Interest is only tax-deductible if at arm’s length or subject to a thin cap rule determined with respect to the

taxable profits before EBITDA. Interest expenses are not deductible where the surplus of interest expenses over interest income exceeds 30% of EBITDA.

n/a

6 Prevent treaty abuse• Greece has rules and procedures to facilitate the exchange of information on (in)direct tax issues.

• The EU PSD, introduced in March 2016, prohibits the exemption of dividend income and the relative WHT exemption in case of artificial transactions.

n/a

7 PE status • According to current legislation, there are specific criteria to restrict the possibility to avoid the PE status. n/a

8 TP - intangibles • With the L 4172/2013, OECD guidelines for TP are introduced as the application tool and interpretation framework. Any changes to OECD guidelines have immediate effect.

n/a

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• See action point 8. n/a




• With L 4484/2017 and L 4490/2017, regulations have been introduced for the automatic exchange of financial account information and for CbC reporting for MNEs with consolidated income exceeding EUR 750 million.

• On 4 December 2017, the Greek Public Revenue Authority published its Decision (POL 1184/2017) containing clarifications for filing CbC reports and other disclosure requirements,

• With Decision POL 1111/2018, the exchange of CbC reporting has been extended to include a list of countries with which Greece will exchange CbC reports on a mandatory basis and a list of countries with which exchange of CbC reporting will take place on a voluntary basis.

n/a



13 TP – documentation• The current legislation requires full TP documentation and increased disclosure requirements not only for MNEs

but also for domestic groups. A set of administrative penalties and fines mainly regarding deadlines for the submission of relevant documentation to the tax authorities is in place.

n/a


• The new procedural tax code contains a provision for the implementation of appeals to the administrative and tax authorities. In addition, further enhancement is expected to be achieved after the harmonisation of the legal framework with EU directive 2015/2376, with L 34474/2017, with regard to advanced cross boarder agreements and advanced transfer pricing agreements. With decision (POL) 1049/2017, the Greek Public Revenue Authority provided guidance on procedures and other application issues.

n/a


• Greece has adhered to the MLI, which was signed on 7 June 2017. The MLI offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a

67



Country Hong KongPKF member firm PKF Hong Kong

Your contact Henry Fung / Candice Ng




2 Hybrids

• The Hong Kong Inland Revenue Department (“IRD”) noted that the BEPS project has an action plan to neutralise the effects of hybrid mismatch arrangements and is considering issuing a practice note regarding this action plan in light of the release of the BEPS final reports.

• The Inland Revenue (Amendment) No. 2 Ordinance 2016 was enacted to clarify the profits tax and stamp duty treatment of regulatory capital securities including certain hybrid instruments issued by financial institutions to meet the Basel III capital adequacy requirements.

n/a

3 CFCs• As Hong Kong adopts a source-based taxation system, there are no CFC rules and no specific

action is expected.n/a


• The IRD has been heavily regulating the deduction of interest expenses in Hong Kong. The IRD considered that the current rules and practices are effective in defending against potential abusive deduction of interest expenses.

• Hong Kong currently has no group ratio, fixed ratio or thin capitalisation rules.

n/a


• The progress report issued by the OECD’s Forum on Harmful Tax Practices (FHTP) on 24 January 2018 indicates that the aircraft leasing tax treatment and exemption for ship operators in Hong Kong are in line with the requirements under Action 5 of BEPS.

• The Inland Revenue (Amendment) (No. 6) Ordinance 2018 (“No. 6 Ordinance”) was enacted and came into effect on 13 July 2018. No. 6 Ordinance contains certain provisions, so that concessionary tax treatment in the tax regimes for corporate treasury centres, reinsurance business, captive insurance business, shipping business, aircraft lessors and aircraft leasing managers will be available only if the conditions are fulfilled regarding the determination of whether profits producing activities are carried out in Hong Kong.

• The Government is expected to clarify No. 6 Ordinance through issuing further guideline on application in DIPN (i.e. practice notes).

• The Government is considering amending the tax concessions for corporate treasury centres, professional reinsurers and captive insurers to observe BEPS standards.

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• The IRD is taking a more prudent approach in granting tax resident certificates. The IRD would consider whether the applicants are eligible for treaty benefits before issuance of the certificates.

• The Government indicates that only a PPT may be included in Hong Kong tax treaties in the future.

• A new tax treaty entered into between Hong Kong and Finland contains certain Action 6 and Action 14 BEPS recommendations and a main purpose test, which is similar to a PPT. It is expected that future tax treaties of Hong Kong may also include a PPT.

• The IRD plans to amend future tax treaties and may issue a relevant practice note in respect of granting tax resident certificates.

7 PE status

• No. 6 Ordinance codifies the definition of PE in Hong Kong and the applicability of Hong Kong profits tax on the profits attributable to the PE even if there is no relevant tax treaty.

• Under the TP regime of No. 6 Ordinance, the separate enterprises principle is required to be adopted for the attribution of profits to PE of a non-Hong Kong resident in Hong Kong. The Authorized OECD Approach will be applied for the profits attribution for PE in No. 6 Ordinance.

• The Government is expected to clarify No. 6 Ordinance through issuing further guideline on application in DIPN.

8 TP - intangibles

• The IRD would treat TP as a high priority and intends to issue a further practice note regarding Actions 8 to 10.

• No. 6 Ordinance introduces a comprehensive TP regime covering sale, transfer and use of assets and provision of services or financial arrangements between associated persons.

• The above ordinance has also incorporated the OECD guidance on development, enhancement, maintenance, protection or exploitation (“DEMPE”) functions for the use or transfer of intangible property.

• The Government is expected to clarify No. 6 Ordinance through issuing further guideline on application in DIPN.

9 TP – capital related high-risk transactions • See action point 8. • See action point 8.

10 TP – other high-risk transactions • See action point 8. • See action point 8.

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• In No. 6 Ordinance, a Hong Kong ultimate parent entity of multinational enterprise group with prior-year annual consolidated revenue of HK$6.8 billion or above must file a CbC Report in Hong Kong unless certain exception applies. The IRD shall exchange CbC data with certain jurisdictions under the Multilateral Competent Authority Agreement on the Exchange of CbC Reports (“CbC MCAA”).

• As of 18 October 2018, there are 74 signatories of the CbC MCAA, with varying numbers of activated exchange relationships depending on the jurisdiction. Hong Kong has 4 bilateral arrangements for the exchange of CbC reports for early reporting periods starting from 2016, which are France, Ireland, South Africa and the United Kingdom.

• Hong Kong joined CRS agreements which are aimed to fight tax evasion through the AEOI between relevant jurisdictions.

• The first CbC reports will be filed in 2019.


• The legislation on AEOI as promulgated by the OECD was introduced and came into effect on 30 June 2016. A new anti-avoidance provision is also introduced in tax laws, which voids any arrangements entered into by person, if the aim of such arrangement is to avoid any AEOI due diligence or reporting obligations.

• The Government decides to expand the list of reportable jurisdictions from 75 to 126 jurisdictions thus HK can execute AEOI with most of the AEOI-committed jurisdictions.

• The Inland Revenue (Convention on Mutual Administrative Assistance in Tax Matters) Order was gazetted on 13 July 2018 which provides a legal framework for Hong Kong to conduct AEOI on a multilateral basis.

• Under the CRS agreement in the AEOI framework, financial institutions are expected to report financial accounts held by tax residents of overseas reportable jurisdictions to the IRD on an annual basis.

• Based on the OECD comments regarding the CRS rules in Hong Kong, the Inland Revenue (Amendment) (No. 7) Bill 2018 has been gazetted on 2 November 2018 to refine the provisions that implement the arrangement for AEOI. Mandatory Provident Fund Schemes (“MPF schemes”), Occupational Retirement Schemes Ordinance (“ORSO”) registered schemes, ORSO pooling agreements and approved pooled investment funds will likely become reporting financial institutions and subject to AEOI.

• Arrangement between the Mainland China and Hong Kong for conducting AEOI has taken effect on 6 September 2018. Hong Kong has activated exchange relationships under AEOI with Mainland China and 53 other jurisdictions and is expected to conduct AEOI with Mainland China for the first time by the end of 2018 along with 13 other jurisdictions.

• MPF schemes and ORSO registered schemes should start conducting due diligence and collecting relevant member information for AEOI starting from 1 January 2020.

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• No. 6 Ordinance introduces the three-tier TP documentation requirement and codifies such TP documentation requirements into local law. There is an exemption from preparing the master file and local file for certain small sized enterprises and those enterprises with relatively small amounts of related party transactions.

• The new TP rules would cover not only transactions of assets and services, but also financial or business arrangements like the making of loans between intra-group companies. However, the Government has no intention to introduce thin capitalisation rules at this stage.

• CbC reports are required to be filed within 12 months after the end of the relevant accounting period commencing on or after 1 January 2018.

• The first CbC reports will be filed in 2019. The Government is expected to clarify No. 6 Ordinance through issuing further guidelines on application in DIPN.


• The IRD views that improvements in cross-border tax dispute resolutions would be treated as a high priority.

• No. 6 Ordinance was passed to formalise a statutory dispute resolution mechanism for facilitation of cross-border disputes related to Comprehensive DTTs.

• A new tax treaty entered into between Hong Kong and Finland contains certain Action 6 and Action 14 BEPS recommendations.

n/a


• The MLI is considered by the IRD as a high priority.

• In order to modify the current comprehensive DTTs in a synchronized manner, Hong Kong is one of the 85 signatories to the MLI as of 27 September 2018. The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

• Inland Revenue (Amendment) Ordinance 2018, which came into effect on 2 February 2018, gives effect to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters in Hong Kong. The Chief Executive in Council will be empowered to give effect to any tax arrangements made by Hong Kong with more than one jurisdiction as well as those made by Mainland China and apply the same to Hong Kong.

n/a

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Country HungaryPKF member firm PKF Consulting Kft.

Your contact Vadkerti Krisztián





3 CFCs • Hungary has introduced CFC legislation.• Definition of CFC will be significantly changed. (minimum 50% of shares or profit or

voting rights should be held directly or indirectly) A permanent establishment can also be treated as a CFC. A list of non-commercial activities will be defined.

4 Interest deductions • No specific action taken yet.• Thin cap rules will be changed (instead of present debt/capital ratio, deductible interest

expenses will be linked to the EBITDA).

5 Harmful tax practices • No specific action taken yet.• Test of rights exercised according to intended use will be extended for range of

transaction as well.






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11 BEPS data collection• CbCR obligations have been published on 15 May 2017. First CbCR must be submitted pertaining to financial

year 2016, within 12 months after the last day of financial year 2016.n/a




• A new decree of the Ministry of National Economy has been published on 18 October 2017. As from tax year 2018 TP documentation shall be introduced. In summary, the following information should be reported:

- The whole Group (both from a geographical, legal and business perspective); - Supply chain applied for the five most important products and services as well as for products and services

if their turnover exceeds 5% of the Group’s sales; - Financial and tax issues of the Group on a consolidated basis. - A brief description of the main transactions and value creation is also required. IPs and financial activities

are to be specified.

• The Local File contains information as usual. However, a detailed presentation of the connection between accounting records and TP documentation shall be provided.

• Profitability of low value-added services shall be decreased by 3-7%.

• Provisions are optional for 2017.

• A detailed guideline was issued by the Hungarian Tax Authority in May 2018 concerning new doc liability. The most important part of the local file must be the functional analysis. Analysis based on questionnaire as set up by the OECD (Toolkit on Comparability and Mineral Pricing p. 105-112) is highly recommended. Application of OECD Guidelines 2017 is expected.

n/a



• Hungary is one of the 85 signatories of the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a



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Country IndiaPKF member firm PKF Sridhar & Santhanam Chennai India

Your contact S Hariharan / Sudha Ashok



1 Digital economy

• An Equalisation Levy of 6%, enacted with effect from 1 June 2016, is chargeable on the gross payment for specified digital services and facilities, received or receivable by a non-resident who does not have a PE in India.

• With effect from April 2018, a foreign entity would be considered to have a significant economic presence in India if it has significant transactions / soliciting of business / interaction with users through digital means/ provides download of data or software in India.

• Central Board of Direct Taxes (CBDT), tax authority in India, invited suggestions to establish threshold limit for determining of Significant Presence.


3 CFCs• The rules of residence were already changed to vest residency in India for foreign companies whose Place

of Effective Management (POEM) is in India. These rules have been made applicable from financial year beginning on 1 April 2016. Final guidelines to determine the POEM were issued in January 2017.

n/a

4 Interest deductions• Thin capitalisation rules introduced. Interest to associated enterprises allowable only to the extent other

interest payments fall short of 30% of EBITDA from 1 April 2017.n/a


• GAAR have been enacted and would be enforced from financial years beginning on 1 April 2017.

• To ensure nexus approach between income arising from exploitation of IP and expenditure incurred for substantial R&D, royalty income earned by Indian resident patentee from a royalty developed and registered in India is taxable at a beneficial rate.

• Application forms for private tax ruling have been modified to include the name, address and country of the residence of immediate parent company and ultimate parent company of the non-resident applicants of a private tax ruling.

• CBDT issued instruction on procedure for dealing with Rulings received from other jurisdictions.

n/a

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6 Prevent treaty abuse• GAAR should address this.

• In addition to GAAR India has amended its DTTs with Mauritius, Kazakhstan and Cyprus to prevent abuse of the DTT. India’s DTT with Singapore is also impacted as the same linked with Mauritius DTT.

n/a

7 PE status• This is governed by tax treaty rules.

• With effect from April 2018, the scope of “business connection” has been widened to include a person acting on behalf of the non-resident who principally concludes contracts for the non-resident.

n/a

8 TP - intangibles• TP provisions are used to deal with this.

• Master file requirements will address this.n/a




• No specific action taken yet.

• Safe Harbour Rules published in 2017 specifies the mark-up for receipt low value-adding intra-group services at a maximum of 5% for specified transactions. The entire value of international transaction including the mark-up should not exceed INR 10 crore.

n/a

11 BEPS data collection• Transactions between related parties are required to be certified as being at arm’s length. CbC reporting

provisions have been implemented from financial year beginning on 1 April 2016. The exchange of information clause in the DTTs is available.

n/a



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• TP documentation is mandatory for all persons having transactions with associated enterprises. CbC reporting implemented with effect from April 2016. A three-tier approach to documentation has been implemented:

- Master File; - Local File; - CbC Reporting.

• Guidelines relating to Master File and CbC Reporting were notified in October 2017.

• Deadline for filing CbC reporting by Parent entity or alternate reporting entity resident in India has been notified.

• Instruction governing the appropriate use of CbC reports and outlining a process to monitor, control and review such appropriate use.

n/a

14 Dispute resolution • Recourse available such as Advance rulings, APAs, Safe Harbour rules, Dispute Resolution Panel and MAP. n/a


• India is one of the 85 signatories of the MLI. The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a

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Country IrelandPKF member firm PKF FPM

Your contact Paddy Harty



1 Digital economy• The EU VAT directive applies and is already implemented into domestic law e.g. the introduction of the MOSS

scheme applies the destination principle of taxation. Since 1 January 2015 Ireland has treated the place of consumption as the place where VAT arises.

n/a

2 Hybrids• Ireland currently does not have anti-hybrid rules. However, anti-hybrid rules are included in the EU ATAD. As an

EU member state, Ireland is required to adopt laws and regulations necessary to comply with the ATAD anti-hybrid rules by 31 December 2019 at the latest.

• Ireland is expected to introduce legislation in relation to hybrids on 1 January 2020.

3 CFCs• Ireland has confirmed it will introduce EU ATAD compliant CFC legislation for accounting periods commencing

on or after 1 January 2019. • 1 January 2019


• Ireland already has significantly complex interest rules, depending on the activity concerned (e.g. investment or trading activities). EU ATAD contains interest restriction rules that must be implemented by EU member states. However, a transition period applies for member states that have national, targeted rules for preventing BEPS that are as effective as Action 4. The Department of Finance has stated “The provisions on interest deductions are deferred until 2024 for countries like Ireland, that already have strong targeted rules”.

• Ireland is expected to introduce legislation during the timeframe 1 January 2020 - 1 January 2024.

5 Harmful tax practices• Ireland has implemented CbC reporting requiring large multinational groups to disclose details of their profits

and other key data on a CbC basis. The first reports were filed with the Irish Revenue in 2017 and will be exchanged with the tax authorities in all relevant countries.

n/a

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6 Prevent treaty abuse • Ireland is likely to include a PPT in tax treaties as a preferred option. This is expected to be included through the MLI and in any future bilateral agreements entered into by Ireland.

• Subject to implementation of the MLI and any future bilateral agreements.

7 PE status

• This will be implemented through the MLI.

• Finance (No 2) Act 2013 and Finance Act 2014 resulted in new Irish incorporated companies having default Irish tax residence. In July 2016, Ireland agreed to adopt the European Commission’s Anti-Tax Avoidance Directive.

• Subject to implementation of the MLI.

8 TP - intangibles• The Irish Knowledge Development Box (KDB) was introduced on 1 January 2016 and provides for profits from

certain intangible assets to be taxed at 6.25%. The KDB was assessed by the EU and the OECD and found to be the first such regime to fully compliant with the new international standards for patent boxes.

n/a


• Ireland has not introduced a requirement for an Action 13 master file and local file to be prepared, although this may be implemented in the future. However, Ireland does have transfer pricing documentation requirements.

• Not yet known

10 TP – other high-risk transactions • See Action Point 9. • See Action Point 9.


• Ireland has adopted a Mandatory Disclosure regime under which promoters and taxpayers must provide information to Revenue on certain transactions which give rise to a tax advantage. Irish Revenue has also signed up to a number of different international information sharing initiatives with the EU, OECD and US including the EU’s DAC on tax transparency.

• Irish Revenue is continuing to work on the implementation of DAC 3 dealing with exchange of information.


• Ireland already has a mandatory disclosure regime together with strong general anti-avoidance regulations. Ireland has concluded TIEA with 26 countries, 25 of which have been concluded, with the agreement with Macao not yet in effect.

• Ireland will continue to adopt best practice approach as stipulated by OECD.

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• CbC legislation was implemented in Finance Act 2015 and provides for mandatory reporting for multinationals as a result of the BEPS recommendations. Ireland signed a MCAA in January 2016 to share these reports with other tax authorities. In 2015, Ireland adopted the Commission’s fourth AML Directive which provides for greater transparency on beneficial ownership of companies and trusts.

• On 23 June 2016, Revenue published FAQs on CbC reporting to clarify the requirements of Action 13. Some of the issues covered by the documents are (i) the interpretation of CbC reporting legislation, (ii) filing obligations, (iii) the appointment of surrogate parent entities, (iv) the information to be included in a report, (v) the secondary reporting mechanism and (vi) equivalent CbC reporting.


• Ireland’s bilateral APA program is effective from 1 July 2016 and applies to bilateral APA applications made to Revenue on or after this date. Therefore, the Revenue guidelines do not apply to: (i) Bilateral APAs signed before 1 July 2016; (ii) Formal bilateral APA applications that have been submitted to Revenue before 1 July 2016 (but in respect of which an APA has not been concluded as of 1 July 2016) and (iii) Unilateral APAs, i.e. agreements solely between the taxpayer and Revenue and not involving another competent authority.

• The program applies only to TP issues (including the attribution of profits to a PE) and is conducted within the legal framework of the DTT that Ireland has entered into with the other jurisdiction concerned. An application may be made by a company that is tax resident in Ireland for the purpose of the relevant treaty and also by a PE in Ireland of a non-resident company in accordance with the provisions of the relevant treaty. The bilateral APA program is intended to apply in respect of a transaction where the TP issues are complex, e.g. where there is significant doubt about the appropriate application of the arm’s-length principle or where there would otherwise be a high likelihood of double taxation.

• Where the TP issues involve more than two tax jurisdictions, of which Ireland is one, the Revenue will consider entering into a series of bilateral APAs. The bilateral APA program is voluntary: taxpayers can choose whether or not to enter into it.

n/a


• Ireland is one of the 85 signatories to the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a



79



Country ItalyPKF member firm PKF MGP Studio Tributario e Societario

Your contact Marco Giuliani



1 Digital economy

• An amendment to a law decree introduced a “transitory web tax” applicable to multinationals with total revenues of more than EUR 1 billion per year and sales worth more than EUR 50 million in Italy. Despite the literal wording, such a tax is the outcome of an “assessment” procedure the aforementioned MNEs may opt for. In other words, MNEs may appraise with the Tax Agency the existence of a PE in Italy and consequently attribute to the PE the “proper” taxable income accordingly.

• In 2018, Italy’s Ministry of Economy and Finance launched a public consultation on the two proposals for new Directives of taxation of the digital economy released by the European Commission which refers to the introduction of a Digital Services Tax and the corporate taxation of a significant “digital presence”.

2 Hybrids

• Italian tax rules already prevent the mentioned effects under said mismatch arrangements.

• In July 2016, the Italian Tax Code has introduced an anti-avoidance provision whereby foreign hybrid instruments can be treated in Italy as debt/equity only if the relevant proceeds are fully/partially taxable in the foreign Jurisdiction (or the same proportion if the deduction is partial).

• On 8 August 2018, the Italian Government issued a draft Legislative Decree for the implementation of the EU ATAD Directives into domestic law. One of the provisions tackles hybrid mismatching.

• The Italian Government will officially release the new set of provisions by the end of 2018.

3 CFCs

• According to the already existing Italian CFC rules, the profits realised by a non- resident company with tax residence in a tax haven are taxable on an accrual basis unless at least one of the two following exceptions are met: (i) the ultimate Italian shareholder is able to prove that the CFC “mainly and effectively” carries on an effective trading or industrial business in its country of tax residence (ii) the Italian shareholder can prove that the establishment of the CFC in the low-tax country was not tax-motivated.


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3 CFCs (continued)

• New definition of tax haven for CFC purposes which applies to all jurisdictions (other than an EU or EEA country that has concluded an exchange of information agreement with Italy) having a nominal CIT rate lower than 50% of the Italian tax rate.

• On 8 August 2018, the Italian Government issued a draft Legislative Decree for the implementation of the EU ATAD Directives into domestic law. One of the provisions tackles the existing CFC rule.


• Interest expenses are deductible up to an amount equal to interest income accrued in the same tax period. Any excess over that amount is deductible up to 30% of EBITDA of the company.

• There is no possibility to transfer the surplus of non-deductible interest expenses within an Italian fiscal unit for foreign companies which meet the requirements for the national consolidation.

• On 8 August 2018, the Italian Government issued a draft Legislative Decree for the implementation of the EU ATAD Directives into domestic law which slightly modifies the interest deduction rules.


5 Harmful tax practices• On 24 April 2017, Italy’s Council of Ministers enacted a Law Decree which provides the exclusion of

trademarks and logos from the patent box regime to align the rules with BEPS Action 5. n/a


• Generally, in order to prevent abuse, the DTTs signed by Italy are applicable only if the recipient of the payment is the beneficial owner as defined by OECD guidelines.

• No specific provisions have been included yet to tackle double tax exemption, which may arise under certain circumstances.

n/a

7 PE status• The domestic definition of a PE has been amended by the 2018 Budget Law, so that it is aligned

with the revised approach presented in the final report on Action 7 of BEPS.

• Italian relevant tax rules are already in line with those recommended by BEPS.

8 TP - intangibles

• On 24 April 2017, Italy’s Council of Ministers enacted a Law Decree which provides a change in the definition of the arm’s length principle for TP purposes and the introduction of new downward adjustment mechanisms to align with the revised definition.

• On 30 May 2018, the Italian Tax Authority issued a form to claim the “TP corresponding adjustment” as a result of one that occurred in a foreign jurisdiction according to the arm’s length principle.

n/a

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• Italy has agreed to exchange CbC information with all EU Member States under the Directive 2016/881/UE of 25 May 2016.

• With regard to non-EU Member States, as at 31 May 2017, Italy has entered into the Multilateral Competent Authority Agreement on the Exchange of CbC Reports (CbC MCAA).

n/a


• No specific action taken yet. However, it is expected that this will be implemented as soon as results from initiative under action point 11 will be available.

• On 30 July 2018, the Italian Ministry of Economy and Finance launched a public consultation on the Legislative Decree that aims to implement the EU Mandatory Disclosure Rules.


• Effective tax year 2016, Italy has introduced country-by-country reporting obligations (CbC reporting).

• The obligation to file a CbC report applies to Italian resident companies controlling an MNE group having at least EUR 750 million consolidated revenues in the tax year before the reporting period, which are not controlled by persons different from individuals.

• Filing the CbC report is required within 12 months after the last day of the relevant tax year.

n/a

14 Dispute resolution• Italy implemented the possibility to apply for MAP in order to amicably resolve disputes about

double taxation under DTT or TP rules.n/a


• Italy joined the FATCA and CRS agreements which are aimed to combat tax evasion through the AEOI between the countries.

• Italy is one of the 85 signatories of the MLI. The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a

82



Country JapanPKF member firm PKF Shiodome

Your contact Jun Kurozumi



1 Digital economy

• In accordance with the Act for Partial Revision of the Income Tax Act and Other Acts (Act No. 9 of 2015), the Consumption Tax Act was partially amended with the revision of consumption taxation on cross-border supplies of services such as digital content distribution.

• The criterion for determining either domestic or foreign transactions has been revised from the location of the office of the service provider associated with providing such services to address of the service recipients.

n/a

2 Hybrids• In accordance with 2015 tax reforms in Japan, foreign dividend exclusion rule was revised based

on the BEPS action plan. Purpose of this reform is avoidance of double non-taxation for dividends between countries.

n/a

3 CFCs

• Undistributed profits of a foreign subsidiary located in a tax haven are included in the Japanese parent company’s taxable income, pursuant to Japan’s CFC for corporate taxpayers and individuals. A Japanese corporation owning a 10% or more direct or indirect interest in a CFC is required to include its pro rata share of the taxable retained earnings of the CFC in its gross income in certain situations. Dividends paid by the CFC are not deductible when calculating the undistributed income.

• Japan’s 2017 tax reform amended the CFC rules to subject a “Foreign Related Company” that has an effective income tax rate of 20% or lower in its jurisdiction of residence to Japan’s CFC regime, when it is one of three types of companies: (i) a “paper company” (ii) a “cash box” (iii) a “black-listed company.”

• The 2019 tax reform outline proposes to amend the CFC rules by expanding the definition of a “cash box” entity, while narrowing the definition of a “paper company”, among other changes.

• There is CFC regulation in Japan. Income earned by CFCs must be included in the taxable income of the Japan shareholder under certain circumstances.

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• Japan has interest deduction limitation provisions to prevent companies from claiming excess interest deductions. The regime limits deductibility of interest, royalty, lease and other payments, where the interest payments to foreign parties are excessive compared with the company’s income (i.e. more than 50% of adjusted income). Adjusted income is defined as taxable income, adding back interest expense, depreciation expense, and exempted dividend income, but excluding extraordinary income or loss. Interest expenses that are not deductible can be carried forward for up to seven years.

• The 2019 tax reform outline proposes to amend the foregoing rules to align with the BEPS Action 4 final recommendations by (i) expanding their application to include interest payments to unrelated parties, and (ii) lowering the limitation ratio from 50% to 20% of adjusted income, among other changes.

n/a


6 Prevent treaty abuse• In accordance with 2015 tax reforms in Japan, special measures to impose income

tax on unrealised capital gains on financial assets held by an individual at the time of departure from Japan were adopted.

• There are LoB rules or PPT rules in tax treaties with certain countries.

7 PE status• In accordance with 2014 tax reforms in Japan, the AOA for attribution of profits to a PE

was adopted.• PE is defined by tax law.

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8 TP - intangibles • No specific action taken yet.

• Intangibles are defined by tax law.

• There are TP administrative guidelines for (i) intangible properties to consider in examinations; (ii) contribution to the formation, maintenance or development of intangible properties and (iii) cost contribution arrangement.


10 TP – other high-risk transactions • No specific action taken yet.

• There are TP administrative guidelines for (i) transaction for the licensing of intangible property and (ii) treatment of intra-group services.


• Japan has signed the Multilateral Competent Authority Agreement (MCAA) on the Exchange of Country-by-Country Reports, which will facilitate the exchange of CbC reports among more than 60 countries. Japan has not yet signed any bilateral agreements with non-signatories to the MCAA on the Exchange of Country-by-Country Reports.

n/a


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• A CbC report is required for fiscal years beginning on or after 1 April 2016 for Japanese taxpayers and Japanese PEs of foreign corporations which are members of a multinational group whose total consolidated revenue in the prior fiscal year is JPY 100 billion or greater.

• Must be filed via e-Tax no later than 12 months after the last day of the ultimate parent’s fiscal year end.

• CbCR must be provided in English and Japan has adopted the OECD's XML Schema standardized electronic format.

• Master File:

- First filing year, revenue threshold, filing dates and penalties are the same as for CbCR.

- Virtually the same as Master File proposed in the OECD Action 13.

- Master File must be prepared in Japanese or English and submitted electronically via e-Tax.

• Local File:

- New or modified existing local documentation now includes elements of OECD Action 13 LF content.

- Taxpayer is exempt if (i) total transaction amount with that foreign affiliate for the previous fiscal year is less than JPY 5 billion, and (ii) total transaction amount for intangibles with the foreign affiliates for the previous fiscal year is less than JPY 300 million. Additional support may be required for intercompany prices if LF is not required.

n/a

14 Dispute resolution • No specific action taken yet.

• Revised DTT with some countries includes treaty arbitration clauses.


• Signed “Convention on Mutual Administrative Assistance in Tax Matters” in November, 2011

• Japan is one of the 85 signatories of the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a



86



Country Jordan PKF member firm PKF Jordan

Your contact Mohammed Khattab




2 Hybrids

• Jordan signed several Treaties for the Avoidance of Double Taxation that contain provisions similar to what is mentioned here in the report. For the sake of reference we have chosen the Treaty between the Council of Arab Economic Unity States regarding Avoidance of Double Taxation and Prevention of Tax Evasion on Taxable Income and Capital as it is signed by several Arab countries and contains relevant provisions that cover this report.

• Article 9: “Associated Enterprises” explains the cases covered and exceptions.

n/a

3 CFCs • Article 9: “Associated Enterprises”. n/a


• Article 11: “Interest” states that interest arising from investments of all types is subject to tax in the contracting state where these interests occur, and these interests might also be taxable in the state where the beneficiary resides.

• The article also provides a definition of the interests, their applicability and exceptions.

n/a


• Article 9/4 excludes tax evasion cases from the provisions of items 2 and 3 of this article.

• Article 26/1 gives the contracting states the right to request interpretation of the Treaty’s provisions if it appeared that one of the other contracting states implemented or is currently implementing any provision incorrectly far from the goals and objectives relevant to the avoidance of double taxation and prevention of tax evasion.

n/a

6 Prevent treaty abuse• Article 25 of the Treaty: “Non- Discrimination” covers this point as it defines nationals whether natural persons

or legal entities, states when the nationals, PE and projects of any contracting state are excluded from tax in other contracting states.

n/a

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7 PE status• Article 5: “Permanent Establishment” defines Permanent Establishments and states also when an

establishment is excluded from the PE status.n/a

8 TP - intangibles• This point is covered in articles 4: “Resident” which explains the resident status, Article 22: “Other Income”,

Article 23/4: “Tax on Capital” and Article 24: “Double Tax Avoidance Methods”.n/a


• This point is covered in articles 4: “Resident” which explains the resident status, Article 22: “Other Income”, Article 23/4: “Tax on Capital” and Article 24: “Double Tax Avoidance Methods”.

n/a


• This point is covered in articles 4: “Resident” which explains the resident status, Article 22: “Other Income”, Article 23/4: “Tax on Capital” and Article 24: “Double Tax Avoidance Methods”.

n/a

11 BEPS data collection • Article 27: “Exchange of Information”. n/a



13 TP – documentation• This point is covered in articles 4: “Resident” which explains the resident status, Article 22: “Other Income”,

Article 23/4: “Tax on Capital” and Article 24: “Double Tax Avoidance Methods”.n/a


• Article 26/1 gives the contracting states the right to request interpretation of the Treaty’s provisions if it appeared that one of the other contracting states implemented or is currently implementing any provision incorrectly far from the goals and objectives relevant to the avoidance of double taxation and prevention of tax evasion.

• The article also states the procedures in such a case and the competent bodies.

n/a

15 Multilateral instrument• The Treaty between the Council of Arab Economic Unity States regarding Avoidance of Double Taxation and

Prevention of Tax Evasion on Taxable Income and Capital.n/a

* Jordan signed several Treaties for the Avoidance of Double Taxation that contain provisions similar to what is mentioned here in the report. For the sake of reference we have chosen the Treaty between the Council of Arab Economic Unity States regarding Avoidance of Double Taxation and Prevention of Tax Evasion on Taxable Income and Capital as it is signed by several Arab countries and contains relevant provisions that cover this report.

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Country KuwaitPKF member firm PKF Bouresli & Co.

Your contact Tariq M Bouresli



1 Digital economy• Kuwait has signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters Convention.

The Convention will enable Kuwait to fulfil its commitment to begin the first of such exchanges by 2018.n/a

2 Hybrids • Kuwait does not have the proposed legislation. n/a

3 CFCs • Kuwait does not have the proposed legislation. n/a

4 Interest deductions • Kuwait IT Law limits the deductibility of interest in certain cases. n/a

5 Harmful tax practices • Kuwait does not have any preferential tax regimes. n/a


7 PE status

• Kuwait’s Department of Inspections and Tax Claims (DIT) has recently changed its approach as to the interpretation of the permanent establishment (PE) concept with respect to services rendered by non-residents in Kuwait. The DIT has introduced the concept of a “Virtual Service PE,” pursuant to which, when determining whether the period when services are rendered by a non-resident exceeds the (usually 183-day) threshold provided in a tax treaty, no consideration is to be given to the physical presence of employees or contractors of the service provider for establishing the nexus. Thus, a service PE may be created even if employees of the service provider are not present there and perform their activities entirely offshore. This may result in the denial of income tax relief claimed by non-residents under the applicable double tax treaties of Kuwait. Although the

n/a

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7 PE status (Continued)

new approach adopted by the DIT has not been officially announced, in several recent cases, the DIT has denied use of the OECD interpretation of PE clauses in double tax treaties and has subjected non-resident companies to domestic taxation on the basis of the “Virtual Service PE” concept. The draft IT Law for introducing Business Profit Tax in Kuwait was submitted by the Kuwait MOF to Parliament for discussion and approval. The draft law includes provisions which signal the intent of the MOF to align with the global

community to address BEPS, focusing on artificial avoidance of PE status as well as addressing tax arbitrage gained through the use of harmful tax practices.

8 TP - intangibles • Kuwait IT Law regulates the transfer pricing between associated enterprises. n/a





11 BEPS data collection• Kuwait signed the multilateral convention on mutual administrative assistance in tax matters. This will enable

Kuwait to fulfil its commitment to begin the first of such exchanges by 2018.n/a






• Kuwait is one of the 85 signatories of the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies. On 9 July 2018, the Kuwaiti Cabinet approved the MLI. The MLI is awaiting approval by the Kuwait Parliament. Once the domestic ratification process has been completed, Kuwait would need to deposit its instrument of ratification, approval or acceptance of the MLI with the OECD and confirm its MLI positions. The MLI will enter into force for Kuwait on the first day of the month following the expiration of a period of three calendar months beginning on the date of deposit of such instrument.

n/a



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Country LatviaPKF member firm PKF Latvia SIA

Your contact Maruta Zorgenfreija





3 CFCs • There is no CFC legislation. n/a


• Interest payable is considered to be a deemed distribution and hence liable to CIT to the extent that the associated liabilities exceed 4 times the equity capital of the company at the beginning of the taxable period concerned, as reduced by the fixed-asset revaluation reserve and other reserves not formed from distributable profits.

• The thin cap rule does not apply to interest paid on loans or borrowings from financial institutions.

• There is also a general rule restricting interest expense exceeding EUR 3 million to no more than 30% of EBITDA.

n/a




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• Under Government Regulation 397, the CbC report filing requirement applies to a Latvian taxpayer who is part of a multinational group with total consolidated revenues exceeding EUR 750 million for the financial year and meets certain criteria.

• CbC reporting began in 2016, which was the first reporting year. The CbC report filing deadline is 12 months after the end of financial year. The first notification for the reporting year 2016 was due on 31 August 2017.

• According to current transfer pricing legislation, Latvian taxpayers are not required to prepare and submit a Master File to the tax authorities.

n/a



• Latvia is one of the 85 signatories of the MLI. The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a

92



Country LibyaPKF member firm PKF Exclusive Correspondent - Libya

Your contact Tarek Brigh





3 CFCs• There is no specific CFC legislation in Libya, but in general, for foreign source income, the Tax Authorities levy

taxes on resident companies on all profits arising from foreign sources in the same way as income from local sources except for income raised for persons as salaries.

n/a

4 Interest deductions• An interest-free loan was introduced after the 2013 Islamic Banking Law came into effect on 1 January 2015,

prepared under the National Transitional Council and approved by the General National Congress.n/a




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8 TP - intangibles • Transferring Intangibles is not common under the Libyan tax system, No specific action taken yet. n/a





11 BEPS data collection• Transferring funds overseas between domestic and foreign branches is scrutinised more by central Libyan

bank regulations.

• No other specific action taken yet.

n/a


• Foreign and domestic companies that are registered in Libya are obliged to submit their tax return every year even if they freeze or suspend operations in the country (even under force majeure).

• No other specific action taken yet.

n/a

13 TP – documentation • See action point 12. n/a

14 Dispute resolution• In case of disagreement between domestic and foreign institutions Libyan law is mostly used. However,

several country to country agreements are used to resolve treaty- related disputes.n/a

15 Multilateral instrument• Libya is not a signatory to the MLI.

• No specific action taken yet.n/a

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Country LuxembourgPKF member firm PKF Audit & Conseil Sàrl; Alliance Révision

Your contact Detlef Xhonneux / Olivier Martin




2 Hybrids

• Luxembourg implemented in 2015 the July 2014 amendment of the EU PSD disallowing the benefits of the Directive (in essence participation exemption relief) if the “dividend income” gave rise to a “tax deduction” in the source country.

• Luxembourg has implemented the EU ATAD Directive in domestic law with effect as of financial years starting on 1 January 2019 (Law passed on 19 December 2018).

n/a

3 CFCs• CFC legislation in accordance with EU ATAD Directive is introduced with effect as of financial years starting on

1 January 2019 (Law passed on 19 December 2018).n/a

4 Interest deductions• 30% EBITDA thin capitalisation rule in accordance with EU ATAD Directive is introduced with effect as of

financial years starting on 1 January 2019 and with regard to intercompany loans concluded as of 17 June 2016 (Law passed on 19 December 2018).

n/a

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• The IP regime is abolished with effect as of 1 July 2016. The existing IP regime will, however, remain available during a transitional period which ends on 30 June 2021 for: (i) Qualifying IP rights which have entered the IP regime before 1 January 2016, and; (ii) Qualifying IP rights which have been acquired during the period from 1 January 2016 till 30 June 2016 to the extent that the qualifying IP rights have been acquired from unrelated parties, or if they are acquired from related parties, the IP rights benefitted upon their acquisition from the Luxembourg IP regime or from a similar foreign IP regime and (iii) Qualifying IP rights that are acquired from related parties between 31 December 2015 and 1 July 2016 and that did not benefit from the Luxembourg IP regime or a similar foreign IP regime, the benefits provided for by the IP regime will only be available for 2016 income tax and 2017 net worth tax.

• Moreover, the Luxembourg tax authorities spontaneously inform competent foreign tax authorities about the persons benefitting from the Luxembourg IP regime in relation to qualifying IP acquired or constituted on or after 6 February 2015.

• The advance tax ruling process has been formalised as of the tax year 2015 and advance tax rulings are reviewed by a ruling commission.

• As of 1 January 2017, Luxembourg will automatically exchange all advance tax rulings and unilateral APAs covering cross-border transactions or situations, as well as under certain conditions, advance tax rulings and unilateral APAs covering cross-border transactions or situations that were issued, amended or renewed by the Luxembourg tax authorities between 1 January 2010 and 31 December 2016.

n/a



8 TP - intangibles

• The advance tax ruling process has been formalised as of the tax year 2015 and advance tax rulings are reviewed by a ruling commission.

• As of 1 January 2017, Luxembourg will automatically exchange all advance tax rulings and unilateral APAs covering cross-border transactions or situations, as well as under certain conditions, advance tax rulings and unilateral APAs covering cross-border transactions or situations that were issued, amended or renewed by the Luxembourg tax authorities between 1 January 2010 and 31 December 2016.

• With effect as of 1 January 2017, Luxembourg has introduced new legislation clarifying that the arm’s length remuneration between related parties is to be determined based on the key principles included in the OECD TP Guidelines, as revised by the actions n° 8-10 of the OECD BEPS action plan.

n/a

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• With effect as from 1 January 2017, Luxembourg has introduced new legislation clarifying that the arm’s length remuneration between related parties is to be determined based on the key principles included in the OECD TP Guidelines, as revised by the actions n° 8-10 of the OECD BEPS action plan.

• By the end of December 2016, the Luxembourg tax authorities issued new guidance on the determination of arm’s length remuneration for intra-group financing transactions. The main differences compared to previous guidance issued are that:

- The equity required to carry out the activity needs to be determined based on the equity at risk taking into account all facts and circumstances; previous safe haven rules (i.e. equity of 1% with a max. of EUR 2 million) have been abolished;

- Unilateral APAs granted based on previous guidance will not be applicable anymore; - In principle, the arm’s length remuneration needs to be determined based on a TP analysis, except if the

functions and risk profile of the Luxembourg entity is comparable to functions and risk profile of certain regulated activities.

n/a


• With effect as from 1 January 2017, Luxembourg has introduced new legislation clarifying that the arm’s length remuneration between related parties is to be determined based on the on the key principles included in the OCED Transfer Pricing Guidelines, as revised by actions n° 8-10 of the OECD BEPS action plan.

n/a


• Luxembourg tax authorities spontaneously inform competent foreign tax authorities about the persons benefitting from the Luxembourg IP regime in relation to qualifying IP acquired or constituted on or after 6 February 2015.

• As from 1 January 2017, Luxembourg will automatically exchange all advance tax rulings and unilateral APAs covering cross-border transactions or situations, as well as under certain conditions, advance tax rulings and unilateral APAs covering cross-border transactions or situations that were issued, amended or renewed by the Luxembourg tax authorities between 1 January 2010 and 31 December 2016.

n/a



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• On 23 December 2016, Luxembourg has introduced CbC Reporting by transposing into domestic law the EU Directive 2016/881. CbCR will be applicable for the first time for tax years ending on 31 December 2016. Thus, Luxembourg companies that are part of a multinational group that realises consolidated revenues of at least EUR 750 million (or an equivalent amount in a currency other than EUR) have to notify the Luxembourg tax authorities whether they are the parent entity of the multinational group, the surrogate parent entity, an EU constituent entity or a non-reporting constituent entity. Notifications should have been done by 31 December 2016. As the CbCR regulations have been introduced shortly before calendar year-end, the deadline for the notification to the tax authorities was extended until 31 March 2017. For subsequent fiscal years, notification must be done before the end of the reportable fiscal year.

• Finally, if the Luxembourg entity is the parent entity, the surrogate parent entity or the constituent reporting entity, it will in addition to the notification to the tax administration also be required to file a CbC report in line with the requirements of the EU Directive 206/881 within 12 months after the end of the fiscal year covered by the CbC report.

• Companies that do not comply with the CbCR regulations may be imposed fines up to EUR 250,000.

n/a



• Luxembourg is one of the 85 signatories of the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories- and-parties.pdf). The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a



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Country MacedoniaPKF member firm Effect plus

Your contact Nikolaki Miov, Kristina Tilik



1 Digital economy • Initiative on drafting a law for electronic services.

• Macedonia has become the 117th jurisdiction to join the Inclusive Framework on BEPS (“IF”). Being part of the IF will facilitate the implementation of agreed minimum standards, as well as the peer review processes and will provide Macedonia’s with further support. The MOF has published that by the end of 2019 its plan is to implement all actions of OECD BEPS.

2 Hybrids • No specific action taken yet. As above under point 1

3 CFCs • No specific action taken yet. As above under point 1

4 Interest deductions • No specific action taken yet. As above under point 1

5 Harmful tax practices • No specific action taken yet. As above under point 1

6 Prevent treaty abuse • No specific action taken yet. As above under point 1

7 PE status • No specific action taken yet. As above under point 1

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8 TP - intangibles

• Law on corporate income tax is the highest jurisdiction regarding TP. Law stipulate that a taxpayer involved in intercompany transactions is obligated to present, upon the tax authority’s request, sufficient information and analysis for proving that the prices applied are in line with the arm’s-length principle The Convention for avoiding of double or no-taxation and the Custom Law help and support the regulation of TP. However, the procedures for implementing them are not yet introduced.

As above under point 1


• As above under point 8. As above under point 1


• As above under point 8. As above under point 1

11 BEPS data collection • No specific action taken yet. As above under point 1


• No specific action taken yet. As above under point 1

13 TP – documentation• There are no rulebooks or guidance related to what the contents of adequate documentation should look like

for proving that the prices applied are in line with the arm’s length principle, as required by Law on corporate tax. The OECD Guidelines are the only reference which may be used.

As above under point 1

14 Dispute resolution • No specific action taken yet. As above under point 1

15 Multilateral instrument • No specific action taken yet. As above under point 1

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Country MaltaPKF member firm PKF Malta

Your contact Donna Greaves




2 Hybrids

• In 2015, an amendment has been effected to the applicability of the participation exemption on dividends derived from a participating holding in order to implement the provisions of article 1(1) of EU Directive 2014/86/EU. The participation exemption applicable to dividends derived from a participating holding will continue to apply. However, where such profits benefit from the exemption from WHT set out in article 5 of EU Directive 2011/96/EU, the participation exemption would only apply to the extent that such profits are not deductible by the relevant subsidiary distributing the dividend in that other EU Member State. The same applies to a PE situated in Malta of a parent that is established in another EU Member State.

• Malta agreed to Anti-Avoidance Directive 1, rules addressing hybrid mismatches have also been included, whereby it is stated that deduction shall be given only in the Member State where such payment has its source.

• Malta agreed to the ATAD II proposal, aimed at combating hybrid mismatches with regard to non-EU countries, given that intra-EU hybrid mismatches are already addressed by ATAD 1.

• Limitation of the scope: a carve-out for hybrid regulatory capital (limited in time until 31 December 2022) and financial traders; and

• Date of implementation: a longer timeline for coming into force as of 1 January 2020 (with certain exceptions for reverse hybrid mismatches rules that must come into force as of 1 January 2022).

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3 CFCs • No specific action taken yet.

• Malta agreed to the Anti-Avoidance Directive 1, Through a CFC Rule, Member States can treat an entity or a PE as a CFC, and thus have the right to tax such profits as per domestic tax rules. These rules apply where the following conditions are met: (i) the tax payer or together with their associated enterprises hold a direct or indirect participation of more than 50% of the voting rights, capital, or right to profit distribution; and (ii) the actual corporate tax paid on the profits of an entity or a PE is lower than the difference between the corporate tax that would have been charged on the entity or PE under the domestic tax system and the actual tax paid on its profits by the PE or entity. Member states may apply certain carve outs, such as cases of substantive economic activity and certain de minimis cases.


• No specific action, however as a general rule, in ascertaining profits shall be deducted all outgoings and expenses incurred to the extent they were wholly and exclusively incurred in the production of the income, including (a) sums payable by such person by way of interest upon any money borrowed by him, where the Commissioner is satisfied that the interest was payable on capital employed in acquiring the income.

• Malta agreed to ATAD I, where by 2018 has to implement the interest limitation rule. The Interest Limitation Rule limits the borrowing costs to 30% of EBIDTA. However, by way of derogation, a taxpayer may be given the right to deduct exceeding borrowing costs up to a threshold of EUR 3 million or to fully deduct exceeding borrowing costs if the taxpayer is a standalone entity. Under this rule, Member States also have the following options: (i) new loans or those loans used to fund long term public infrastructure within the EU may be excluded from this rule; (ii) to allow taxpayers to deduct in full or in part exceeding borrowing costs subject to the satisfaction of group gearing ratio conditions; (iii) to carry forward or backwards exceeding borrowing costs; and (iv) to exclude financial undertakings from the scope of this rule.


• In Malta, there is no preferential IP-regime.

• Malta has procedures to facilitate the exchange information on direct tax issues.

• Malta has anti-abuse provisions in place to combat harmful tax practices, where any scheme which reduces the amount of tax payable by any person is artificial or fictitious or is in fact not given effect to, the Commissioner shall disregard the scheme and the person concerned shall be assessable accordingly.

• Malta agreed to ATAD 1, where by 2018 through a GAAR, Member States have the right to ignore any arrangements which have been put into place for the main purpose of obtaining a tax advantage that defeats the objects of the applicable tax law and are not genuine.

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6 Prevent treaty abuse • Some DTTs with Malta comprise a GAAR rule while others contain a specific LoB rule. n/a













• Malta is one of the 85 signatories of the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a



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Country MauritiusPKF member firm PKF (Mauritius)

Your contact Christine Sek Sum





3 CFCs • No specific action taken yet. There is no CFC legislation in Mauritius. n/a



• Tax reform measures for the Global Business sector were announced in the 2018 Budget in June and they were enacted in August 2018. The following measures come into effect as per below.

• The deemed foreign tax credit regime (FTC) available to category 1 global business license companies (GBL1) will be abolished after 31 December 2018.

• A partial exemption regime will be introduced for all companies (with the exception of banks) and will be applicable to specified income. To qualify for the partial exemption regime, companies must satisfy enhanced substantial activities requirements, as defined per the FSC. Guidelines were issued in October 2018.

• The category 2 global business license (GBL2) regime, which currently benefits from a full exemption from income tax, will also be abolished effective from 1 January 2019.

• Introduction of the Authorised Company - companies conducting business and having their place of effective management outside of Mauritius, will need to apply for an authorization from the FSC as an Authorised Company. An Authorised Company is treated as non-resident for tax purposes in Mauritius.

• Under grandfathering provisions, GBL1 and GBL2 companies issued with licenses before 16 October 2017 will continue to access the current regime until 30 June 2021.

• A new concept of the place of effective management (‘POEM’) has been introduced in determining the tax residency status of a company in Mauritius. A guideline on POEM is to be issued by the MRA.

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5 Harmful tax practices (Continued)

• The deemed FTC for banks will be abolished effective from 1 July 2019 and will be replaced with a new regime that will introduce an equal tax treatment for domestic banks and foreign banks. Income of up MUR 1.5 billion will be taxed at 5%, and income above that threshold will be taxed at 15%.

• Freeport operators and private Freeport developers will no longer be exempted from income tax. The current regime will be grandfathered until 30 June 2021 for companies that had been issued with a freeport certificate before 14 June 2018.

See here above











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• No specific action taken yet. There is no TP legislation in Mauritius, although there is a requirement in the Income Tax legislation for transactions to be at arm’s length.

• CbC requirements apply to MNE groups with an annual consolidated revenue of at least EUR 750 million, with effect for reporting fiscal years beginning on or after 1 July 2018. A CbC report has to be filed annually with the Tax Authority where the MNE group’s ultimate parent entity is resident in Mauritius. In this case, the ultimate parent entity will be responsible for filing the CbC report on behalf of the group. A surrogate parent entity may be nominated by the MNE group to file the report under specific circumstances.

n/a



• On 5 July 2017, Mauritius signed the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). It submitted a provisional list of reservations and notifications in respect of the various provisions of the MLI. On 10 October 2018, Mauritius submitted a draft MLI position to the OECD Secretariat in preparation of Mauritius’ definitive MLI Position to be provided upon the deposit of its instrument of ratification. Out of 42 DTTs that Mauritius has concluded to date, 23 have been identified as Covered Tax Agreements.

• Mauritius indicated its commitment to revise the remaining 19 DTTs on a bilateral basis to ensure that they comply with BEPS minimum standards.



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3 CFCs

• Mexico adopted the non-deductibility criterion when a payment is made to a foreign entity that is controlled by the taxpayer; that the payment is made for interest, royalties or technical assistance and that the payment is considered non-existent for tax purposes in the country or territory where the foreign entity is located and that the foreign entity does not consider the payment as taxable income according to the tax provisions that are applicable to you (article 28, section XXXI, subsections a, b and c of the Law on Income Tax).

n/a

4 Interest deductions• Mexico adopted the criterion of not granting deductibility to the payment of interest deriving from the amount

of the taxpayer's debts that exceed three times its stockholders' equity arising from debts contracted with related parties residing abroad (Article 28, section XXIII of the Law on Income Tax).

n/a




8 TP - intangibles • The aspects related to intangibles are considered in the annual informative statement corresponding to the local file.

n/a

Country Mexico PKF member firm PKF México

Your contact Jimy Cruz


107











• On 1 January 2016, the Mexican tax authorities established in article 76-A fraction III of the LISR the obligation to submit the CbC Informative Return.

• Mexican taxpayers that are obliged to file CbC Informative Returns are:

- Mexican multinational holding companies: Consolidated revenues in the immediately preceding tax year equal to or exceeding MXN 12 billion (approximately USD 631 million);

- Subsidiaries designated by the holding company;

- If the Mexican tax authorities cannot obtain the information through the information exchange method set forth in the international treaties in force that Mexico has executed, the Mexican taxpayer will have to submit the CbC Informative Return within 120 days after notification.

n/a



• Mexico is one of the 85 signatories of the MLI. The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a

108



Country MoroccoPKF member firm PKF Maroc

Your contact Abdellatif Zarkal





3 CFCs • No specific action taken yet. Moroccan tax law does not contain any CFC rules. n/a

4 Interest deductions • No specific action taken yet. There are no thin capitalization rules in Morocco. n/a

5 Harmful tax practices • The tax authorities have commenced exchanging information with the other administration (CNSS, Customs). n/a


7 PE status

• PE was dealt with in Circular No 717 (issued in April 2011). Hence, the PE status varies depending on the company’s legal status (e.g. Liaison Office vs Coordination Centre) as well as on the existence or not of DTT.

• Based on the 2019 budget law “liaison office” and “coordination centre” will be designated in the tax code as “establishment of non-resident companies”.

• Changing of the coordination centre to the designation “establishment of non-resident companies”

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8 TP - intangibles

• Morocco adheres to the arm’s length principle and broadly accepts references to the OECD Guidelines. In particular, all intercompany transactions must be conducted at arm's length.

• APA procedure was introduced in January 2015 in Moroccan Tax Code. Typically, an APA can take up to 12 months to conclude and is normally for a term of four years. The Tax Authorities cannot challenge the TP method agreed under an APA.

n/a




• The APA (Refer to Action Point 8) was introduced to avoid any misinterpretation of TP applied regarding intercompany transactions.

n/a

11 BEPS data collection• The financial year law of 2018 introduces the possibility for the company to ask for the opinion from the fiscal

administration on the fiscal consequences of any project.n/a



13 TP – documentation• No specific action taken yet other than application of arm’s length principle on related party transactions as

well as introducing the APA as highlighted in the content of Action Point 8.n/a

14 Dispute resolution • In all DTTs concluded with an amicable dispute resolution mechanism is included. n/a

15 Multilateral instrument• On 21 May 2013, Morocco has signed the Convention on Mutual Administrative Assistance in Tax Matters.

It aims to combat tax avoidance through cooperation that ranges from exchange of information, including automatic exchanges, to the recovery of foreign tax claims.

n/a

110



Country NepalPKF member firm T R Upadhya & Co.

Your contact Shashi Satyal



1 Digital economy• Central Billing Monitoring System (CBMS) is under trial run for the purpose of monitoring VAT invoices issued

digitally by taxpayers using their software. This will assist in monitoring taxable transactions on a real time basis.n/a


3 CFCs

• Nepal has CFC provisions which tax the income earned by foreign entities controlled by Nepalese resident persons. A CFC is an entity not residing in Nepal, in which a resident person holds an interest and controls or may benefit from 50% or more of the rights to income, capital or voting power alone or with not more than four other residents.

• A CFC should distribute dividends to its beneficiaries in accordance with the beneficiaries' rights. This dividend is taxable as income of the beneficiary. Other dividends distributed by a CFC are exempt from tax.

n/a


• Interest is deductible if incurred in the course of conducting a business or investment. This is the case if the borrowed funds, for which interest is paid, are used in that production or used to acquire an asset used in that production. The deductibility of interest paid by resident entities to controlling entities is limited. Controlling entities are organizations or persons, which are tax exempt, or non-resident persons, or associates of exempt organizations, or non-resident persons that own or control at least 25% of the resident entity.

• Where interest is paid to a controlling entity the deduction must not exceed the sum of all interest that is to be included in the entity’s taxable income plus 50% of the entity’s taxable income (which is calculated without including any interest income derived by the entity and not deducting interest expenses).

• Any interest for which a deduction is denied may be carried forward and treated as incurred during the next income year.

n/a

5 Harmful tax practices • Provision for characterisation of an arrangement as part of GAAR is briefly mentioned in ITA under section 35. n/a

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6 Prevent treaty abuse• The provision of GAAR shall address the prevention of treaty abuse.

• In addition to provision of GAAR, DTAA with India has the provision for prevention of abuse of agreement under Article 28.

n/a

7 PE status

• Specific criteria are set to recognise any entity as PE under section 2 of ITA. PE means a place from where a person fully or partially conducts his business. The term also includes place of fully or partially conducting business through agents (other than independent agents), place where main equipment or machinery is kept or installed or used, places where a person has provided any technical, professional, or consultancy service through his employees or otherwise for more than 90 days (at once or severally) in a 12 months period and a place where a person is engaged in a construction, assembly, or establishment project for 90 days or more, and the place of supervision of such project.

n/a

8 TP - intangibles• Briefly mentioned in the ITA which shall be as per internationally recognised TP rules where cross border

trading and financial transactions between affiliated entities have to be conducted in arm’s length transaction. No specific action plan to prepare detailed TP guidelines.

n/a


• Briefly mentioned in the ITA which shall be as per internationally recognised TP rules where cross border trading and financial transactions between affiliated entities have to be conducted in arm’s length transaction. No specific action plan to prepare detailed TP guidelines.

n/a


• Briefly mentioned in the ITA which shall be as per internationally recognised TP rules where cross border trading and financial transactions between affiliated entities have to be conducted in arm’s length transaction. No specific action plan to prepare detailed TP guidelines.

n/a







112



Country NetherlandsPKF member firm PKF Wallast

Your contact Ruud van der Linde / Jeroen van Strien




2 Hybrids

• The Netherlands implemented the July 2014 amendment of the EU PSD effective from 1 January 2016 disallowing the benefits of the Directive (in essence participation exemption relief) if the “dividend income” gave rise to a “tax deduction” in the source country.

• On 29 May 2017, the EU Member States reached an agreement on the amendment of the original ATAD. The new/ amended Directive (ATAD 2) includes the coverage of hybrid mismatches, also between EU-member states and non-member states.

The implementation in domestic law has to take place before 31 December 2019. For reverse hybrids anti-abuse legislation, implementation is due by 31 December 2021 at the latest.

• On 29 October 2018 the Dutch government published the first draft bill. Parties are able to provide their input until 10 December 2018. Based on the input provided, the first draft bill may be amended and subsequently the legislation process will continue to assure the implementation before the mandatory deadline of 31 December 2019.

• Based on the first draft bill and the outlines provided in the draft bill, the Netherlands will implement the anti-abuse legislation in line with the ATAD 2 itself (i.e. the Netherlands will not implement more stringent anti-abuse legislation).

• Apart from the unilateral implementation, the State Secretary for Finance stated in his fiscal policy agenda that the government, with regard to hybrid mismatches, aims to include an anti-hybrid provision in all its bilateral tax treaties (if possible via the MLI).

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3 CFCs• Draft legislation published, will be implemented

effective 1 January 2019.

• The implementation of the EU ATAD, which includes additional CFC legislation requirements, is required before 1 January 2019. Based on the EU ATAD 1, countries are able to opt for a Model A (certain sources of income of a CFC are attributed and taxed) and/or Model B (the income of the CFC is attributed and taxed) implementation of the CFC legislation.

• The Dutch government announced that they will implement both the Model A and B CFC legislation.

• The Model A implementation will lead to taxation of specific income (such as interest, royalties and dividends) of foreign (indirect) subsidiaries and branches which are located in a low tax jurisdiction (statutory tax rate which is lower than 7%) or country included on the EU non-cooperative tax jurisdictions list. The Netherlands will implement all the safe harbours of the ATAD 1.

• The Model B implementation has already been implemented for many years by virtue of the at arm’s length principle in the Dutch legislation. Therefore no further action will be required.

4 Interest deductions • Draft legislation published, will be implemented

effective 1 January 2019

• The implementation of the EU ATAD 1, which includes additional measures to restrict interest deductions, is required before 1 January 2019.

• To meet the required implementation deadline, the Dutch government published the final draft earnings stripping legislation in September 2018. It is expected that this final draft will be passed by the Dutch House of Representatives and the Dutch Senate before 1 January 2019.

• Following the implementation of the earnings stripping measurements, three other interest deduction limitations will be abolished as of 1 January 2019.

• The Dutch implementation of the earnings stripping will be a deduction limitation of net interest due in excess of EUR 1 million or 30% of the EBITDA of the tax payer.

• Unlike the options provided by the EU ATAD 1, the Netherlands will not implement any safe harbours.

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• As of 2017, the access to the innovation box regime will be limited to patented IP and certain software only. Small caps (member of a group with < EUR 50 million revenue) will, within certain limits, remain permitted to apply the innovation box also with regard to non- patented (but otherwise qualifying) R&D. In addition, the nexus approach will be implemented meaning that the tax advantage will be limited to IP which is sufficiently developed in The Netherlands only.

• The EU Directive on the AEOI between EU Member States has been implemented with effect as from 1 January 2017.

• On 2 June 2017 the Dutch Government published a bill to implement EU Directive 2016/881 of 25 May 2016, amending Directive 2011/16/EU regarding mandatory AEOI for tax purposes. Amongst others, the bill introduces penalties for group companies residing in the Netherlands in relation to certain failures to correctly or timely submit a CbC-file and the mandatory disclosure of cross border tax rulings.

n/a



• The new tax treaty between Ghana and the Netherlands provides for a PPT.

• The Dutch government has announced to welcome specific anti-abuse measures in new DTT negotiations.

• On 20 December 2017, the Dutch government submitted the bill for the ratification of the MLI to the Second Chamber of parliament.

• The choices of the Dutch government with regards to the MLI will lead to substantial adjustments in the DTT’s with countries that share the Dutch level of ambition.

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7 PE status • No specific action taken yet.

• The Dutch government has announced to welcome the enhanced definition of PE in new DTT negotiations.

• On 20 December 2017, the Dutch government submitted the bill for the ratification of the MLI to the Second Chamber of parliament.

• The choices of the Dutch government with regards to the MLI will lead to a substantial adjustments in the DTT’s with countries that share the Dutch level of ambition.

8 TP - intangibles • Implemented in the Dutch TP Decree.• On 11 May 2018 the Dutch MoF published the updated TP decree. This

new decree aligns the former decree with the new TP Guidelines for MNEs and Tax Administrations.

9 TP – capital related high-risk transactions • Implemented in the Dutch TP Decree.

• On 11 May 2018 the Dutch MoF published the updated TP decree. This new decree aligns the former decree with the new TP Guidelines for MNEs and Tax Administrations.


• Implemented in the Dutch TP Decree.• On 11 May 2018 the Dutch MoF published the updated TP decree. This

new decree aligns the former decree with the new TP Guidelines for MNEs and Tax Administrations.



• EU wide, on 25 May 2018, the Mandatory Disclosure Directive had been adopted.

• Based on the adopted Mandatory Disclosure-Directive, all EU-member states (therefore including the Netherlands) will have to implement legislation before 31 December 2019, which has to be enforced as of 1 July 2020.

• With retroactive effect, as of 25 June 2018, all qualifying cross-border aggressive tax planning has to be reported to the Dutch tax authorities.

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• The Netherlands implemented additional TP documentation requirements as of 1 January 2016, including CbC-reporting requirements for large caps (member of a group with > EUR 750 million revenue) and minimum standards with regard to TP documentation (master file, country file) for mid-caps (member of a group with > EUR 50 million revenue) and large caps.

• The proposition of the Tax Plan 2018 by the Dutch MoF contains – amongst others – a proposal to explicitly allow ‘voluntary filing’ (also known as ‘parent surrogate filing’) from countries that did not (yet) implement CbC-reporting. The proposal has entered into force on 1 January 2018.

14 Dispute resolution • No specific action taken yet.

• The Dutch State Secretary of Finance has the intention to implement the proposed measures for dispute resolution in tax treaties via the MLI. However, regarding mandatory and binding arbitration – and as far as a Covered Tax Agreement already contains an existing provision in such a regard – The Netherlands intends to make a limited reservation.


• The Netherlands is one of the 85 signatories to the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

• The Dutch State Secretary of Finance has the intention to implement the proposed measures for dispute resolution in tax treaties via the MLI. However, regarding mandatory and binding arbitration – and as far as a Covered Tax Agreement already contains an existing provision in this respect – the Netherlands intends to make a limited reservation.

• On 20 December 2017, the Dutch government submitted the bill for the ratification of the MLI to the Second Chamber of parliament. The bill is expected to enter into force on 1 January 2020

• The choices of the Dutch government with regards to the MLI will lead to substantial adjustments in the DTTs with countries that share the Dutch level of ambition.



117



Country New ZealandPKF member firm PKF Bredin McCormack Rewcastle Limited

Your contact Jono Bredin



1 Digital economy• GST was extended to include digital products and services supplied by non-residents to New

Zealand consumers from 1 October 2016.• Various measures remain on the

tax policy work programme

2 Hybrids• Legislation enacted effective 1 July 2018 closely follows all OECD recommendations with suitable

modification for New Zealand context.n/a



• Legislation enacted effective 1 July 2018 introduces a number of technical changes which strengthen the thin capitalisation rules. MNE’s well within existing rules may now suffer non-deductible interest costs due to changes which reduce a taxpayer’s asset base when calculating the debt/total assets ratio. The asset base is reduced through the exclusion of “non-debt liabilities”.

• The legislation also introduces a new “restricted TP rule” to potentially limit the interest rate that can be charged on cross-border loans (over NZ$ 10 million in total) between members of a MNE group.

n/a


6 Prevent treaty abuse• New Zealand has incorporated the OECD’s recommendations on treaty abuse into New Zealand’s

treaty practice.n/a

7 PE status

• Legislation enacted effective 1 July 2018 closely follows all OECD recommendations with suitable modification for New Zealand context. The legislation introduces a new PE anti-avoidance rule to prevent MNE’s from making sales in New Zealand without recognizing a PE to which those sales can be attributed and profits taxed. Conceptually this rule follows Australia’s Multinational Anti-Avoidance Law and the UK’s Diverted Profits Tax.

n/a

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8 TP - intangibles • See point 13 below n/a


• See point 13 below n/a


• See point 13 below n/a





• Legislation enacted effective from 1 October 2018 extends the existing transfer pricing rules by:

- Moving the onus of proof to the MNE, which can only be satisfied by producing TP documentation and analysis to support internal pricing;

- Allowing the Commissioner to not only dispute the pricing, but also the conditions of any supply between members of a MNE group;

- Expressly incorporating the OECD TP Guidelines into the New Zealand domestic legislation; and

- Extending the time bar for TP audits to seven years.

n/a

14 Dispute resolution• New Zealand has ratified the OECD MLI effective from 1 October 2018. This allows New Zealand to adjust its

existing double tax agreements with other participating countries swiftly to adapt to the OECD’s new treaty provisions on anti-abuse, dispute resolution and transfer pricing.

• Amendments to existing DTAs

• Additional Automatic Exchange of Information.

15 Multilateral instrument • No specific action taken yet.

119



Country NigeriaPKF member firm PKF Nigeria

Your contact Tajudeen Akande



1 Digital economy• No specific action taken yet. However, destination principle in the OECD International VAT/GST Guidelines

published on 12 April 2017 has been integrated into the tax system by a recent pronouncement of the court on the VAT treatment of imported intangible service.

n/a





6 Prevent treaty abuse• The PPT to prevent the granting of treaty benefits in inappropriate circumstance is a minimum standard in the

MLI signed by Nigeria on 7 June 2017.n/a



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• On 27 January 2016, Nigeria, together with 30 other countries, signed the Multilateral Competent Authority Agreement for implementing the exchange of country-by-country (CbC) reports. With this action, Nigeria will be entitled to receive CbC reports of multinational enterprises (MNEs) having their headquarters in one of the other MCAA partner countries.

n/a




• On 30 September 2018, the Federal Inland Revenue Service (FIRS) published guidelines on TP documentation:

- Taxpayers with controlled transactions of less than NGN 300 million (approximately USD 833,000) are exempt from keeping contemporaneous TP documentation. Such taxpayers have a timeline of 90 days to submit the master file and local file to the tax authorities upon request;

- Taxpayers with controlled transactions of more than NGN 300 million (approximately USD 833,000) have a timeline of 21 days to submit the master file and local file to the tax authorities upon request.

n/a

14 Dispute resolution• Though Nigeria has not subscribed to mandatory binding arbitration) in its MLI position,

it has however indicated a preference for Article 16 (MAP) in its MLI position.n/a


• Nigeria is one of the 85 signatories of the MLI. It has also submitted its MLI position which lists 19 double tax treaties for amendment. The MLI offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a

121



Country NorwayPKF member firm PKF Beckman Lundevall Revisjon AS

Your contact Rolf Arentz-Hansen



1 Digital economy• Norway already has a similar law that requires non-resident suppliers of digital services to Norwegian business

and private customers to collect VAT on the service rendered.

• The fairly new term of virtual currency has been implemented in both tax and VAT legislation.

n/a

2 Hybrids• The parliament endorses/adopted a rule in 2016 to neutralise the effects of hybrid instruments/entities and

has in the budget of 2018 become even more embedded. Anti-hybrid rules will most likely become more prominent in the near future.

• Not yet known.

3 CFCs• Norway already has a similar law like the CFC rules. The Ministry of Finance has decided that it will review the

Norwegian rules and changes will be submitted for public consultation. • Not yet known.

4 Interest deductions• Norway already has a similar law. In 2016 the ratio was reduced from 30 % to 25 %.

• Further changes have been announced in the 2019 budget – an extension of the rules so that they also will apply for multinational group companies.

• Expected 1 January 2019.

5 Harmful tax practices • Only part of this action is relevant for Norway, where the exchange of unilateral binding statements from the tax authorities should be exchanged automatically.

n/a

6 Prevent treaty abuse • Stricter documentation requirements for WHT on dividends. Applies for foreign shareholders that should have a lower withholding tax than the ordinary 25% on dividend from Norwegian companies.

n/a

7 PE status• In Norwegian tax legislation rules are already in play that avoid an artificial circumvention of the permanent

establishment status. Other restrictions are to be expected in the future, including a limitation of the commissionaire structure.

• Not yet known.

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8 TP - intangibles • OECD TP rules are incorporated in Norwegian TP rules and thereby any changes made in the guidelines are immediately adopted by Norway.

n/a


• OECD TP are incorporated in Norwegian TP rules and thereby any changes made in the guidelines are immediately adopted by Norway.

n/a


• OECD TP rules are incorporated in the Norwegian transfer pricing rules and thereby any changes made in the guidelines are immediately adopted by Norway.

n/a

11 BEPS data collection• Norwegian tax authorities may only exchange CbC information to foreign countries under an international

agreement. Norway has, among others, entered into the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country reports, which provides for automatic exchange of CbC reports.

• SAF-T standard mandatory from January 1, 2020

12 Disclosure of aggressive tax planning • It is unsure whether Norway will implement the proposed OECD recommendations. • Not yet known.


• Norway has introduced Country-by-Country reporting (CbC) rules corresponding to Action 13 of the OECD BEPS Action Plan. So far, no legislation in connection with a Master File and a Local File has been introduced.

• Parent companies tax resident in Norway, with foreign enterprises are obliged to file a CbC report (primary reporting obligation). The consolidated group revenue should be NOK 6.5 billion or more in the year preceding the financial year.

• The obligation to file a CbC report also applies for enterprises tax resident in Norway that are not parent companies, subject to certain conditions.

n/a

14 Dispute resolution • Norway has guidelines based on the OECD’s MAP (Mutual Agreement Procedure). n/a

15 Multilateral instrument • The multilateral instrument (MLI) was signed in Norway on 7 June 2017. n/a

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Country PakistanPKF member firm PKF FRANTS Chartered Accountants

Your contact Faheem Abdul rauf



1 Digital economy

• With the advent of digitalisation of businesses and e-commerce, taxpayers may derive income even from jurisdictions where they are not physically present. This has led the tax authorities to question the right of a State to tax the revenues derived by such taxpayers and the manner in which such tax may be collected. The existing provisions of the Ordinance are also not equipped to deal with the rigors of e-commerce.

To address the above, the Bill proposes to introduce a concept of tax on fee for offshore digital services paid by a resident person, or borne by a PE of a non-resident person. The term fee for offshore digital services has been defined to mean any consideration for providing or rendering services by a non-resident person for online advertising space, designing, creating, hosting or maintenance of websites, digital or cyber space for websites, advertising, e-mails, online computing, blogs, online content and online data, providing any facility or service for uploading, storing or distribution of digital content including digital text, digital audio or digital video, online collection processing of data related to users in Pakistan, any facility for online sale of goods or services or any other online facility. The tax rate on fee for off shore digital services is proposed to be 5% of the gross amount of such services.

The definition is quite extensive in nature and attempts to capture all e-commerce transactions that were previously not covered by the Ordinance.

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2 Hybrids• Pakistan has reserved the right for Article 3 (Transparent entities), Article 4 (Dual Resident Entities) and Article 5

(Application of Methods for Elimination of Double Taxation) not to apply to its Covered Tax Agreements (CTAs), i.e. tax treaties to be amended through the MLI.

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3 CFCs

• In line with BEPS Action Plan 3, the Bill seeks to introduce taxability of income derived by a CFC by inserting a new section 109A of the Ordinance, the salient features of which are as follows:

A CFC is a corporate entity that is registered and conducts business in a different jurisdiction other than a jurisdiction of a residency of the controlled owners.

The concept of CFC has been introduced in order to tax the income of a resident person by attributing its income in CFC. It has been designed to limit artificial deferral of tax by using off-shore low taxed or exempt entities.

The definition of CFC proposed in the Bill is as follows:

(a) more than 50% of the capital or voting rights of the non-resident company are held, directly or indirectly, by one or more persons resident in Pakistan or more than 40% of the capital or voting rights of the non-resident company are held, directly or indirectly, by a single resident person in Pakistan;

(b) tax paid, after taking into account any foreign tax credits available to the non-resident company, on the income derived or accrued, during a foreign tax year, by the non-resident company to any tax authority outside Pakistan is less than 60% of the tax payable on the said income under this Ordinance;

(c) the non-resident company does not derive active business income as defined under sub-section (3); and

(d) the shares of the company are not traded on any stock exchange recognised by law of the country or jurisdiction of which the non-resident company is resident for tax purposes.

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4 Interest deductions• The existing rules for thin capitalisation are provided in Section 106 of Income tax Ordinance under section 106,

whereby profit on debt is disallowed for debt-to-equity ratio exceeding 3:1.n/a


• The Finance Bill of 2018-19 has proposed to amend the provisions of section 109 of the Ordinance by introducing the concept of beneficial ownership and empowering the tax authorities to disregard an entity or a corporate structure, that does not have an economic or commercial substance, or was created as part of a tax avoidance scheme.

• Furthermore, while the Ordinance states that a tax avoidance scheme would include any transaction where the main purpose is to reduce any person’s tax liability, the Bill now seeks to define the term reduction in tax liability. The proposed definition states that such a term means the reduction, avoidance or deferral of tax, or the increase in a refund of tax and includes a reduction, avoidance or deferral of tax that would have been payable under this Ordinance, but are not payable due to a tax treaty for the avoidance of double taxation as referred to in section 107.

• Moreover, an amendment in section 107 has also been proposed, whereby the benefits available under a DTT would be subject to section 109.

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• Article 7 articulates the PPT, a minimum standard which must be adopted by all MLI signatories, and which Parties are allowed to supplement by electing to apply a simplified LoB provision in addition.

Pursuant to Article 7(17)(b) of the MLI, Pakistan has chosen to apply Article 7(4). This provision shall apply to a CTA only where all Contracting Jurisdictions have made such a notification.

Since Article 7 requires reciprocity between the Contracting Jurisdictions to a CTA, a jurisdiction that opted for the PPT in combination with a simplified LoB (e.g., India) cannot apply the simplified LoB in relation to a CTA that opted for a PPT only (e.g. Pakistan).

Furthermore, Pakistan has reserved the right for Articles 8 to 11 (specific anti-abuse rules on dividend transfer transactions, capital gains, PEs in 3rd jurisdictions as well as a saving clause to preserve the rights to tax its own residents) not to apply to its CTAs.

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7 PE status• Pakistan has reserved its right not to apply any of the provisions regarding the avoidance of PE status (Articles

12 – 15).n/a

8 TP - intangibles • TP Provisions are used to deal with it. n/a


• No specific action taken yet. However, the Tax Authorities can use CbC reports to analyse transactions. n/a


• No specific action taken yet. However, the Tax Authorities can use CbC reports to analyse transactions. n/a

11 BEPS data collection• Transactions between related parties are required to be certified as being at arm’s length. CbC reporting

provisions have been implemented with effect from 1 July, 2016. The AEOI clause in the DTTs is available.n/a


• Federal Board of Revenue has amended the tax laws through the Finance Bill 2018. The purpose of these amendments is to review and revise the time limitation on reopening tax assessments and introduce a disclosure clause that will require Pakistani residents to disclose their foreign assets.

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• Every qualifying Pakistani group entity which is member of an MNE group will be required to prepare a master file and every Pakistani group entity will be required to prepare a local file if it meets the following threshold:

• Master file : MNE group turnover of more than PKR 100 million (approx. USD 950,000) Local file: Related party transactions of more than PKR 50 million (approx. USD 475,000)

• The master file and local file should be maintained by taxpayers. There is no fixed submission date however, it needs to be provided to the tax authority within 30 days from the date of request. It is expected that this obligation would come into effect from 1 July 2016.

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14 Dispute resolution • Dispute resolution panel and MAP are available. n/a


• Pakistan has signed the MLI on 7 June 2017.

• Pakistan signed OECD’s Multilateral Convention on Mutual Administrative Assistance in Tax Matters on 14 September, 2016 (effective 1 April 2017) and MCAA on AEOI in June 2017. The Federal Board of Revenue (FBR) has said that the provisions of Multilateral Convention shall have effect for administrative assistance related to taxable periods beginning on or after 1 January 2018.

• The FBR has been able to put into place all the building blocks for automatic exchange of information in record time after ratifying the Multilateral Convention in December 2016. These steps included FBR initiated a pilot project for automatic exchange of information as a collaborative effort between FBR, Her Majesty's Revenue & Customs (HMRC) of United Kingdom (UK) and the OECD's Global Forum on Transparency and Exchange of Information for Tax Purposes Secretariat. The pilot project team has held several meetings and conducted various orientation sessions in collaboration with Global Forum and HMRC. The pilot project has employed a step-by-step approach to the implementation of the required standards for AEOI. The FBR's progress in the pilot project has time and again been appreciated by OECD and HMRC.

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Country PolandPKF member firm PKF Consult Spółka z ograniczoną odpowiedzialnością Sp.k.

Your contact Agnieszka Chamera




2 Hybrids

• Dividends received from another Polish company, an EU/EEA or a Swiss company are exempt from taxation if certain holding and participation requirements are met (the EU PSD).

• According to a new regulation since 1 January 2016, the provisions concerning the tax exemption on dividend payments do not apply if:

- Receipt of dividends occurs in connection with the transactions or activities, which are not real (actual), meaning that arrangements have been introduced to obtain a tax advantage only;

- And these transactions have been put into place without reflecting economic reality.

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3 CFCs

• The rule was amended on 1 January 2018. The tax rate for such income is 19%. A CFC is defined as:

- A foreign company having residence in a tax heaven; or - A foreign company having residence in a state, with whom Poland or the EU has not concluded the

international TIEA; or - A foreign company: (i) in which the Polish resident has at least 50% of the shares or 50% of the voting

rights or 50% of the shares related to the right to participation in profits; (ii) in which at least 33% of income is of a passive nature (dividends and other revenues from share in profits of legal persons, sale of shares, receivables, interest and benefits from all kinds of loans, interest on financial lease, guarantees and warranties, copyrights or industrial property rights, including from the disposal of those rights, disposal and exercise of rights attached to financial instruments,, insurance and banking activities or other financing activities, transactions with associated enterprises if they do not create added value (in the economic sense) or the added value is insignificant (iii) that paid tax which is effectively 50% less than the hypothetical tax obligation which would be due in Poland.

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• The amended rule entered into force effective 1 January 2018. The new rule limits the tax-deductibility of interest in the case of debt financing and applies not only to loans between direct or indirect related parties but also to transactions between unrelated parties.

• According to the amended act, the limit is going to be 30% of the amount corresponding to the excess of the total revenues from all revenue sources (less interest income) over the total of tax-deductible costs (less depreciation charges recognized in the tax year under tax-deductible costs) and debt financing costs (30% of EBITDA). The excess of debt financing costs over the above limit will be non-deductible. However, it will be possible to deduct it within the next five tax years, in accordance with the above rules.

• The statutory limit will not apply to the excess of debt financing costs over interest income not exceeding PLN 3,000,000.

• The limit will not apply to financial enterprises (such as national banks, credit institutions, credit unions), without limitation.

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• Part of DTTs has been changed over past few years to:

- Eliminate specific tax planning possibilities or - Introduce mechanisms of making tax avoidance impossible (e.g. treaty with Luxembourg, Cyprus, Malta,

Singapore),

• Poland has concluded 14 TIEAs, including with so-called tax havens.

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7 PE status• Increase in the number of tax audits of foreign companies conducting business activity in Poland through a PE

in the scope of fulfilling the tax obligation of PE in Poland and the principles of determining the tax income of PE and making financial settlements between foreign company and their PE in Poland.

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8 TP - intangibles • Polish TP rules generally meet the 2010 OECD TP Guidelines. n/a


• Polish TP rules generally meet the 2010 OECD TP Guidelines. n/a


• Polish TP rules generally meet the 2010 OECD TP Guidelines. n/a

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11 BEPS data collection • No specific action taken yet. See * below


• The anti-tax avoidance clause exists since July 2016 in the Polish tax regime. The purpose of this clause is to prevent fictitious transactions that taxpayers carry out primarily to achieve tax advantages. Practically speaking, this means transactions which are hardly justifiable from an economic or business point of view. The Tax Ordinance Act, which includes this regulation, also defines what a tax advantage means, i.e. avoidance, deferral or reduction of a tax liability; creation or overstatement of a tax loss; creation or overstatement of a tax overpayment or a reclaimed amount.

• The legislation sets a threshold of PLN 100,000 which, if exceeded, entitles the tax authorities to invoke the anti-tax avoidance clause. According to the Amending Act, the anti-tax avoidance clause is also applicable to tax consequences arising after its entry into force even if the transactions that brought about those consequences took place before the clause's effective date.

• The MoF in Poland has begun to publish a series of news/statements containing reservations about the possibility of applying a tax evasion clause for selected types of transactions implemented without economic justification/ substance.

n/a


• New regulations concerning TP documentation were introduced and became effective as from 1 January 2017. According to these new regulations:

- The requirement to prepare documentation (local file) depends on the income or costs of the taxpayer in a given financial year.

- Taxpayers whose income or costs, pursuant to accounting regulations, exceeded EUR 2,000,000. - Documentation has to be prepared not only for transactions in the strict sense, but also for other events

recorded in accounting books, as long as they have a significant influence on the taxpayer’s income or loss and were agreed on by the affiliated entities.

- One of the changes most beneficial to taxpayers with respect to the scope of documentation is the introduction of materiality thresholds for transactions; their value will be EUR 50 to 500,000, and they will be established for each taxpayer individually, depending on their income.

- The threshold level for equity links is to be raised from 5% to 25%. - The main novelty is the requirement to provide a statement of concordance of the terms of transactions

and events with the market conditions. So far, taxpayers have not been obliged to demonstrate that transactions are made in accordance with the market conditions, but only to indicate the actual settlement method.

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13 TP – documentation(Continued)

• Taxpayers whose income or loss exceeds EUR 20 million in a given year will also be obliged to prepare a master file demonstrating the settlement mechanisms from the perspective of the group.

• If the taxpayer’s income in a given year exceeds EUR 10 million, they are obliged to prepare benchmark studies in order to verify whether the terms of their transactions with affiliated entities follow the market price rule.

• CbC Report: the largest Polish groups of companies (with consolidated income exceeding EUR 750 million) will be obliged to draw up statements of income, tax paid, and places of business. Based on the template form published, taxpayers will have to provide a list of entities in the group, countries where they have their seats, their main business activity, the tax paid and profit earned, the number of employees, and fixed assets.



• Poland is one of the 85 signatories of the MLI. The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

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* Poland is working on the implementation of Council Directive 2014/107 / EU of 9 December 2014 amending Directive 2011/16 / EU on compulsory AEOI on taxation (OJ L 359, Volume 57, 16.12. 2014, pp. 1-30), which enables the exchange of information at EU level and the OECD CRS, which provides for a similar solution.

131



Country PortugalPKF member firm PKF & Associados, SROC, Lda.

Your contact José Ramos



1 Digital economy • Portugal has implemented the EU Directive regarding VAT on business to costumers on digital services. n/a

2 Hybrids• Portugal transposed into domestic tax law the July 2014 amendment of the EU PSD disallowing the benefits of

the Directive (in essence participation exemption relief) if the “dividend income” gave rise to a “tax deduction” in the source country.

n/a

3 CFCs• Portugal has adopted CFC legislation: profits of subsidiaries located in low-tax jurisdictions are imputed and

taxed at the level of the Portuguese shareholder, irrespective of dividend distributions.n/a

4 Interest deductions • Maximum allowed interest deduction: either EUR 1 million or 30% of adjusted EBITDA. n/a


• GAAR allowing the tax authorities to ignore the legal form of an operation/structure and to tax according to substance.

• Portugal transposed into domestic tax law the January 2015 amendment of the EU PSD, disallowing the benefits of the Directive if arrangements or a series of arrangements are considered not genuine taking into account all relevant facts and circumstances.

• The Portuguese Patent Box Regime, which provides tax benefits for IP revenues and expenses, requires a nexus element in line with the “modified nexus approach”.

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• The transposition into domestic tax law of the January 2015 amendment of the EU PSD (see action point 5) also affects treaty abuse, to the extent that participation exemption rules (exempting dividend income and capital gains) are also applicable when the subsidiary / shareholder is resident in a country that has signed a DTT with Portugal.

• Portugal has already LOBs provisions in some tax treaties. With the implementation of the MLI more treaties will be covered.

• The “Beneficial Owner Central Register” has been created in 2017.

• Implementation of the MLI

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8 TP - intangibles • No specific action taken yet.

• IT is under evaluation as the OECD’s TP Guidelines are referred to in the Portuguese legislation as a source of supplementary guidance in the application of the arm’s length principle.


• No specific action taken yet.• Please refer to 8

above.


• No specific action taken yet.• Please refer to 8

above.


• On 27 January 2016, Portugal signed the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports (CbC MCAA). It has also signed a bilateral agreement for the exchange of CbC information with the United States, which is in force since 2 October 2017.

• Furthermore, Law 98/2017 of 24 August 2017 transposed EU Council Directive 2015/2376/EU of 8 December 2015 and EU Council Directive 2016/881/EU, which amended Directive 2011/16/EU regarding the mandatory and automatic exchange of information in the field of taxation between EU Member States. This Law amended Decree 61/2013 of 10 May 2013 specifying that CbC reports should be automatically exchanged with Member States within 15 months from the end of a given taxable period, with the exception of the first CbC report. This report, which is for taxable periods starting on or after 1 January 2016, should be exchanged within 18 months from the end of that taxable period.

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• Portuguese legislation imposes promotors (lawyers, tax consultants, accountants) involved in potentially aggressive tax planning schemes to communicate such schemes to the tax authorities (without identifying the client).

n/a

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• Multinational companies with an ultimate parent tax resident in Portugal (and under certain circumstances, Portuguese affiliates of a multinational group with an ultimate parent non-resident in Portugal for tax purposes), with a turnover of at least EUR 750 million, have to submit a Country-by-Country report with the Portuguese tax administration.

• Portugal has not adopted the Master File.

• There is no specific legislation regarding the Local File implementing Action 13 of BEPS.

n/a

14 Dispute resolution • Portugal is one of the countries that under the MLI has committed to implement binding arbitration (Article 18 of the MLI)

n/a


• Portugal is one of the 85 signatories of the MLI. The MLI, which was signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policie.

n/a

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Country QatarPKF member firm PKF LLC

Your contact Tareq Ayoub



1 Digital economy

• Qatar Financial Centre (QFC) Tax Regime: QFC 2016 Taxation Manual provides guidelines on territorial basis of taxation of businesses engaged in electronic commerce (EC) where the principal place of business operations of a company engaged in EC is in the QFC, profits will be local- sourced, even if an intelligent server is located offshore. Conversely, a business which has all of its operations outside the QFC apart from operating an intelligent server in the QFC, will not be liable to tax.

• The Qatar Council of Ministers approved the Qatar VAT Law in May 2017 based on the GCC VAT and Excise Tax Framework Agreements. The final VAT law is yet to be published in the Official Gazette; however, it is expected to include special provision for supply of telecommunication and electronically provided services. Qatar might also impose a destination-based VAT on cross-border B2C digital service supplies similar to Saudi Arabia and the UAE.


3 CFCs

• Qatari Tax Law No. 21 of 2009 states that subject to the provisions of tax agreements, payments made to non-residents with respect to activities not connected with a PE in the State shall be subject to a final withholding tax, as follows:

- 5% of the gross amount of royalties and technical fees. - 7% of the gross amount of interest, commissions, brokerage fees, director’s fees, attendance

fees and any other payments for services carried out wholly or partly in the State.

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• Qatari Tax Law No. 21 of 2009 states that where the taxpayer enters into arrangements or carries on operations or transactions one of the main purposes of which is to avoid the payment of the tax due, the Department may counteract the tax advantage the taxpayer obtained because of such arrangements, operations or transactions, in accordance with the provisions of the executive regulations of the law. The Department may, in any of the instances provided for in the previous paragraph, take all or some of the following measures:

- Apply the arm’s length value to a deed or an economic event subjected to a different value by the taxpayer. - Re-characterise the deed where the form of such a deed does not reflect the substance thereof; and. - Adjust the amount of the tax due by the taxpayer or any other person involved in the type of arrangements,

operations or transactions provided in this Article.

n/a


• Qatar’s MOF issued Circular 1 of 2018 which provided procedures and guidance on the implementation and reporting for CRS purposes.

• Qatar has also published in the Official Gazette the Ministerial Decision No. 21 of 2018 on reporting requirements for the Automatic Exchange of CbC Reports.

• Multinational enterprises (MNEs) with consolidated revenue greater that QAR 3 billion are required to submit a CbCR to the Qatari Competent Authority (QCA). Constituent entities of MNEs which are resident in Qatar are also required to notify QCA (i) if they are the ultimate parent or surrogate company, and (ii) if not, inform QCA of the identity and residence of the parent or surrogate company.

• The guideline covers CbCR reporting for all financial years starting 1 January 2017 and must be submitted with 12 months from end of the reportable financial year.

• QFC also issued a written notice which effectively adopts the CbCR requirements under the Decision No. 21 of 2018 issued by the Ministry of Finance.

• OECD identified Qatar as among the 21 countries which offer citizenship and/or residence by investment (CBI/RBI) schemes



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8 TP - intangibles

• Qatari Tax Law No. 21 of 2009 states that where the taxpayer enters into arrangements or carries on operations or transactions one of the main purposes of which is to avoid the payment of the tax due, the Department may counteract the tax advantage the taxpayer obtained because of such arrangements, operations or transactions, in accordance with the provisions of the executive regulations of the law. The Department may, in any of the instances provided for in the previous paragraph, take all or some of the following measures:

- Apply the arm’s length value to a deed or an economic event subjected to a different value by the taxpayer.

- Re-characterise the deed where the form of such a deed does not reflect the substance thereof; and.

- Adjust the amount of the tax due by the taxpayer or any other person involved in the type of arrangements, operations or transactions provided in this Article.

n/a




• Head office charges are allowed as a deduction subject to a ceiling of 3% (1% for banks and insurance) of turnover less subcontract costs.

• QFC updated and issued its 2018 Tax Manual which incorporates international best practices and OECD standards.

n/a




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• Both Public Revenue and Tax Department (PRTD) and the QFCA Tax Department are mandated to examine related party transactions, request and inspect TP documentation and adjust, as necessary, income or expenses based on the arm’s length standard.

• Transactions between related parties and the arm’s length principle are explicitly addressed in the general anti-avoidance provisions of the Qatari Tax Law No. 21 of 2009 and its related Executive Regulations.

• Qatar Financial Centre (QFC) Tax Regime: Part 8 of the QFC Tax Regulations and the Qatar Financial Centre Authority (QFCA) Tax Manual Extract on TP provides detailed guidance on the application of TP rules to ensure that chargeable profits and tax losses are calculated on an arm's length basis in line with the OECD TP Guidelines.

• Qatar published the reporting requirements for the Automatic Exchange of CbC Reports in the Official Gazette which came into effect on 10 September 2018. The CbCR requirements used as basis the CbCR legislation in accordance with BEPS Action 13.

n/a



* Note: Qatar has two tax regimes namely: the State Tax regime promulgated through the Income Tax Law No. 21 of 2009 (Qatar Income Tax Law) and its related Executive Regulations administered by the Public Revenue and Tax Department (PRTD); and the Qatar Financial Centre (QFC) Tax regime administered by the QFC Tax Department. Unless specifically stated, the above information relates to the State Tax regime.

138



Country RomaniaPKF member firm PKF Finconta SRL

Your contact Florentina Șușnea / Alina Făniță











139








11 BEPS data collection• Romania joined the Multilateral Competent Authority Agreement (MCAA) (2016) on the automatic exchange of

country-by-country reports (CbC MCAA) on 19 December 2017.n/a




• Action 13 has been implemented through Emergency Ordinance 42/2017 adapting the Tax Procedure Code in accordance with the EU Directive on Automatic Exchange of Information 2016/881/EU.

• CbC reporting is mandatory for multinational enterprise groups, with a final parent or a nominated substitute based in Romania (a surrogate parent) that in the year preceding the tax reporting year has a consolidated total income of more than EUR 750 million or a sum in RON equivalent to EUR 750 million, as reflected in the consolidated financial statements for the group for that previous tax year.

• The effective date for the CbC reporting is considered to be 1 January 2017, i.e. for tax years starting on or after 1 January 2017. The filing date is 12 months following the last day of the reporting tax year of the group.

• The requirement of preparing a Master File or a Local File is not implemented.

n/a



• Romania is one of the 85 signatories of the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which has been signed by Romania on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a



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Country RussiaPKF member firm PKF MEF Audit

Your contact Klara Vorobyeva



1 Digital economy

• Russia has adopted rules for the VAT treatment of B2C digital supplies of services by foreign suppliers in accordance with the OECD International VAT/GST Guidelines as from 2017: foreign suppliers providing digital services to Russian customers should be tax-registered in Russia and pay VAT themselves.

• As from 2019 similar VAT treatment will apply to B2B supplies of digital services implementing the MCAA on AEOI prescribed by the CRS.


3 CFCs

• CFC rules were introduced into the Russian Tax Code on 1 January 2015. The new rules oblige individuals and legal entities to notify the Russian tax authorities in case they control foreign companies, as well as to report and confirm CFC retained earnings which will be subject to taxation.

• Article 129.5 of the Tax Code of Russia will come into force as from 2018 (in case of failure to pay or partial payment of tax due to exclusion of CFC profit from tax base). This article was not in effect for the 2015-2017 tax periods.

• The Tax Code of Russia allows inclusion of companies in the CFC list based on information obtained from foreign countries.

n/a

4 Interest deductions• Thin capitalisation rules and TP rules which limit interest deductions on loan

transactions between related parties are applicable in Russia. Payables to affiliated subsidiaries are automatically recognised as controlled liabilities.

n/a

5 Harmful tax practices• There are no harmful tax regimes in Russia according to BEPS report (see https://

www.oecd.org/tax/beps/update-harmful-tax-practices-2017-progress-report-on-preferential-regimes.pdf).

n/a

https://www.oecd.org/tax/beps/update-harmful-tax-practices-2017-progress-report-on-preferential-regimes.pdf



141




6 Prevent treaty abuse• It is prohibited to benefit from tax treaty concessions in case a company receiving

money from Russia is an intermediary which then transfers the earnings to offshore territories.

n/a








• On 25 June 2018, the parliament adopted Order of the Federal Tax Service No. MMV-7-17/359 of 30 May 2018 regarding the list of states and territories with which Russia will automatically exchange Country-by-Country (CbC) Reports. The approved list includes the following 49 states and certain territories: States: Argentina, Australia, Austria, Belgium, Brazil, Bulgaria, Chile, Colombia, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, India, Indonesia, Ireland, Italy, Japan, Korea (Rep.), Latvia, Liechtenstein, Lithuania, Luxembourg, Malaysia, Malta, Mauritius, Mexico, Netherlands, New Zealand, Norway, Pakistan, Poland, Portugal, Romania, Singapore, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, United Kingdom, Uruguay. Territories: Cayman Islands, Isle of Man, Guernsey, Jersey.

n/a


• Taxpayers are obliged to disclose information about beneficial owners and CFCs. n/a

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• On 19 May 2018, Order of the Federal Tax Service (FTS) No. MMV-7-17/123 and Order of the Federal Tax Service No. MMV-7-17/124 entered into force. The CbC report should be filed for FY 2017 no later than 12 months after the end of the reporting period for the parent company of the group. In respect of FY 2016, it may be filed voluntarily. The deadline for the submission of a CbCR Notification is 8 months after the end of the financial year. Therefore, in respect of the financial year ending on 31 December 2017, the first CbCR Notifications are due on 31 August 2018 and the first CbC reports are due on 31 December 2018.

• On 26 September 2018, the (FTS) published Letter No. ОО-4-17/14315 clarifying the definition of a multinational group of companies for the application of CbC reporting rules. The key criteria for defining a multinational group of companies that are related through participation in equity and/or control, which group also includes foreign entities without legal personality, are as follows:

- At least one member of the multinational group is a Russian resident, and/or at least one member of the multinational group has a PE located in Russia; and

- At least one member of the multinational group is a resident outside Russia, and/or at least one member of the multinational group has a PE located outside Russia.

n/a

14 Dispute resolution • Russia takes part in FTA MAP Forum to discuss general matters related to programs for conducting MAPs.

• Work in progress.


• Russia is one of the 85 signatories of the MLI (http://www.oecd.org/tax/treaties/ beps- mli-signatories-and-parties.pdf). The MLI, which was signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

• In order to take respective measures, Russia takes part in meetings of Ad Hoc Group on the MLI.

• Work in progress.

143



Country Saudi ArabiaPKF member firm Al-Bassam and Co`s Allied Accountants

Your contact Ibrahim AlBassam / Sultan Al Shubaily / Jaber Nassr

Email [email protected] / [email protected] / [email protected]


1 Digital economy • Introducing VAT.• VAT was introduced as

from 1 January 2018 at a rate of 5%.

2 Hybrids • No specific action taken for neutralising the effects of hybrid mismatch arrangements. n/a

3 CFCs • No specific action taken yet for CFC Rules. n/a

4 Interest deductions • Saudi Tax Law determined a specific formula for loan interests to be accepted as an expense. n/a

5 Harmful tax practices • No specific action taken yet for countering harmful tax practices. n/a

6 Prevent treaty abuse • No specific action taken yet for preventing the granting of DTT benefits. n/a

7 PE status• Some regulations are in place for PE status even according to the signed DTTs, but no action yet for

preventing the artificial avoidance of PE Status.n/a

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8 TP - intangibles • There is TP Manual Draft, but no specific action taken yet. n/a


• There is TP Manual Draft, but no specific action taken yet. n/a


• There is TP Manual Draft, but no specific action taken yet. n/a




13 TP – documentation • There is TP Manual Draft, but no specific action taken yet. n/a

14 Dispute resolution • DTTs may contain provisions for dispute resolution between companies, if any. n/a


145



Country SingaporePKF member firm PKF-CAP Advisory Partners Pte Ltd

Your contact Goh Bun Hiong










146









11 BEPS data collection • As per OECD BEPS recommendation. n/a


• No specific action plan taken yet. n/a

13 TP – documentation • As per OECD BEPS recommendations. n/a

14 Dispute resolution • No specific action plan taken yet. n/a

15 Multilateral instrument • Signed. n/a

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Country SlovakiaPKF member firm PKF Slovensko s.r.o.

Your contact Soňa Ugróczy



1 Digital economy• The EU VAT directive applies and is already implemented

into domestic law.n/a

2 Hybrids

• Effective 1 January 2016, Slovakia implemented new CFC rules. In general, dividends paid from the distribution of profits after 2003 are not subject to taxation in Slovakia, but only to the extent that such profits are not deductible for the subsidiary distributing such profits.

• Implementation is expected in 2018 or 2019.

• Effective 1 January 2017, dividends paid to individuals and legal entities will be taxed (for legal entities only income paid by or to non-treaty countries). The following will be subject to taxation:

- Dividends and other distribution of profits including income paid to “silent partners” in the tax period beginning at earliest 1 January 2017.

- Assets remaining after liquidation of a company or cooperative if either of them is being liquidated from 1 January 2017 or if a court rules on the dissolution of a company after 1 January 2017.

- Any settlement defined in the regular separate financial statements for the reporting period beginning 1 January 2017.

• The personal tax rate is 7%, 35% for non-treaty countries or according to the relevant DTT.

3 CFCs

• Implementation is expected in 2018 – 2019.

• As an EU member state, Slovakia is subject to the ATAD, which must be implemented into its domestic law by 31 December 2018. The ATAD includes a CFC rule.

n/a

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• Thin capitalisation rules were reintroduced on 1 January 2015, although not directly, as part of the implementation of the OECD BEPS Action Plan. Between 2004 and 2014 there were no limitations on tax deductions for both related and unrelated party interest expense and economically equivalent payments. As of 1 January 2015, there is a limitation of tax-deductible interest from loans provided by local and foreign related parties and hereto related expenses equal to 5% of EBIDTA.

• No carry-over of “excess interest” is allowed.

n/a

5 Harmful tax practices• R&D super deduction (25% of eligible costs) has already been implemented into domestic law (1

January 2015).

• Implementation is expected in 2017 or 2018.

n/a


7 PE status• Slovak tax law already addresses the issue of artificial avoidance of a PE.

• Implementation is expected in 2017 – 2018 – 2019.n/a

8 TP - intangibles • No specific action taken yet.• Implementation is expected in 2017 -

2018 - 2019.


• No specific action taken yet.• Implementation is expected in 2017 -

2018 - 2019.


• No specific action taken yet.• Implementation is expected in 2017 -

2018 - 2019.

11 BEPS data collection• No official list of such countries currently publicly available. Apart from all EU Member States

one must take into account the actual list of countries that have a qualifying competent authority agreement in effect to which Slovakia is a party.

n/a



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• The final legislation (Act on International Support and Cooperation in the Field of Tax Administration No. 442/2012 Coll.) came into force on 1 March 2017.

• An ultimate parent entity which is a resident for tax purposes in the Slovak Republic, or a constituent entity, or surrogate parent entity is required to file the CbC report if the consolidated group revenue exceeds EUR 750 million no later than 12 months after the last day of the reporting fiscal year.

• The requirement of preparing a Master File or a Local File is not implemented.

• Multinational companies will be obliged to include CbCR into their Master and Local files, if their consolidated turnover exceeds EUR 750 million.



• Slovakia is one of the 85 signatories of the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which was signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

• Implementation is expected in 2017 - 2018 - 2019.



150



Country SloveniaPKF member firm GM Revizija plus d.o.o., Ljubljana

Your contact Luka Vremec













151




11 BEPS data collection• Based on the Multilateral Competent Authority Agreement on the Exchange of

Country-by-Country Reports, Slovenia will exchange CbC information with 58 other countries (status as of 19 December 2018).

n/a




• Provisions regarding CbC reporting have been implemented in the TPA-2 (based on Council Directive 2016/881/EU) and are effective as of 1 January 2017.

• Entities having their residence in Slovenia and with a total consolidated revenue of more than EUR 750 million are obliged to file a CbC report.

• Slovenia signed the MCAA for the automatic exchange of CbC reports on 27 January 2016. The MCAA will enable consistent and swift implementation of new TP reporting standards developed under Action 13 of the BEPS Action Plan.



• Slovenia is one of the 85 signatories of the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which was signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

• On 13 March 2018, in Slovenia the Act for Ratifying the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting became effective.

• Slovenia was the fifth country to deposit the instrument of ratification with the OECD on 22 March 2018. The effective date is 1 July 2018.

n/a



152



Country SomaliaPKF member firm PKF Somaliland

Your contact Enock Barongo



1 Digital economy • No regulation or specific actions taken yet. n/a


3 CFCs • There is no CFC legislation in Somalia/Somaliland. n/a





153















154



Country South AfricaPKF member firm PKF Durban

Your contact Paul Gering



1 Digital economy

• As from 1 June 2014, VAT legislation has been enacted to impose an obligation on foreign suppliers of electronic services to register and charge VAT where they make supplies of ZAR 50,000 or more.

• South Africa has signed the OECD Mutual Administrative Assistance in Tax Matters Convention which aims for information sharing among signatories in matters of tax. This will be used as tool, in conjunction with the provisions contained in the DTAs with the various countries to exchange information more freely and identify possible e-commerce transactions.

• Legislation has been introduced in the VAT and Income Tax Acts with regard to the tax treatment of cryptocurrencies.

• The Davis Tax Committee (DTC) has also recommended a widening of the source rules to address direct taxes.

• Recent draft regulations were issued to expand the scope of electronic services. Treasury have indicated that it does not intend to distinguish between B2B and B2C as this is concept is not currently adopted in the local VAT system and to adopt such a concept for foreign supplies would create an unfair cash flow advantage for such foreign supplies. Intragroup (i.e. wholly owned subsidiaries) supplies are excluded from this system.

• Previous threshold for registration by the foreign supplier was ZAR 50,000 this has now been extended to ZAR 1 million. (change yet to be gazetted)

• Greater focus to be placed on the creation of PEs by foreign companies.

2 Hybrids

• Various complex anti-avoidance provisions exist which deal with hybrid instruments aimed at particular transactions.

• There are also further interest deductibility restriction provisions.

• Reportable arrangements also assist with identifying hybrid mismatches.

• The DTC has recommended that the anti-avoidance provisions amended to be more aligned with the OECD’s report.

155




3 CFCs

• South Africa has extremely complex and constantly evolving CFC legislation.

• The 2017 amendments to the tax legislation extended the application of the CFC rules to foreign companies which are held by foreign trusts and included in the consolidated AFS of the group in terms of IFRS 10.

• The 2018 draft bills seek to extend these rules further by disregarding any exemption which would have applied to foreign dividends or a capital gain on the foreign shares where a resident connected person made a donation, settlement or similar disposition to the foreign trust this legislation to foreign trusts and that resident or a connected person to such resident receives a distributions of such foreign dividends or capital gain.

• The DTC has recommended that no further changes be made in this area but rather that SA wait to ascertain what changes other countries are adopting to determine if any further changes are required.


• The TP and thin capitalisation provisions currently limit interest deductibility.

• Furthermore, as from 1 January 2015, further provisions have been enacted to limit the interest deduction in respect of certain transactions where the recipient of interest is not subject to tax in South Africa.

• As the current guidance issued by the South African Revenue Service is quite outdated the DTC has recommended that new guidance be issued and the possibility of a safe harbour rule being introduced.

• It was also recommended that there be discussions between the South African Reserve Bank to ensure that the interest cap recommended is acceptable to both parties.


• South Africa currently has a headquarter regime.

• There are also incentive programmes available for companies operating in urban development, industrial development and special economic zones.

• The DTC recommend that a reduced corporate income tax rate be granted to headquarter companies which meet minimum substance requirements.

• A further recommendation is the introduction of APAs in respect of TP.

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• GAAR exist which prohibit treaty abuse such as treaty shopping etc.

• The Income Tax Act was also amended to ensure that CGT arises where a company ceases to be tax resident in SA or ceases to be a CFC to ensure that DTT relief cannot be claimed by that company later on when the company disposes of any property which would otherwise erode the SA tax base.

• The remuneration exemption currently available to SA residents working abroad has been amended in order to limit this exemption to ZAR 1 million and will take effect from 1 March 2020.

• The PPT may be inserted into the various DTTs and effected by way of the multilateral instrument in terms of action 15 of the OECD’s BEPS Project.

• Various DTTs with zero or low rates in respect of WHT are under renegotiation.

7 PE status• The Interpretation Note dealing with PEs was revised to bring it in line

with the recommendations of the OECD.

• Possible refinements to the deeming source rules to ensure that potential PEs are taxed appropriately in SA.

• The DTC recommended that consideration be given to a branch profits tax that is lower than the current corporate tax rate of 28% to encourage foreign entities with SA operations, without a legal entity in SA, to meet their tax burdens in SA.

8 TP - intangibles

• General TP rules anti-avoidance provisions exist to ensure prices are at arm’s length.

• Specific anti-avoidance provisions exist which deny the deduction of royalty payments where the IP is licensed in South Africa but has been exported.

• Exchange control (Excon) regulations also limit the exporting of IP and require approval of royalty rates payable abroad.

• The Excon approvals process has been relaxed to an extent that approval is only required from the Department of Trade and Industry. No longer is approval required from the Financial Surveillance Department of the South African Reserve Bank.

• The DTC has recommended that the OECD recommendations pertaining to TP be adopted.

• Further recommendations were that a binding general ruling (BGR) be issued to include a set of principles pertaining to the South African reality as well as the compulsory requirement for comparability adjustments due to a lack of local comparables.

• The BGR should also include the safe harbour rules with regards to the level of debt funding for inbound loans and a prescribed rate of interest, linked to prime, so as to eliminate the need for extensive benchmarking studies which are rather expensive.

• It was also recommended that the APA regime, as noted above, be implemented.

• Possible revision of the exchange control regulations for greater transparency.

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• General TP rules/thin capitalisation anti-avoidance provisions exist to ensure prices are at arm’s length.

n/a


• General TP rules anti-avoidance provisions exist to ensure prices are at arm’s length.

• The DTC recommended that consideration be given to SA regulators such as Stats SA making company information available so that local comparables are available for the purposes of transfer pricing studies.

• Consideration to adopting the low value-added services as recommended by the OECD also be adopted.

• As noted above, introduction of the APA regime be considered.


• The USA FATCA Intergovernmental Agreement is an agreement between the governments (tax administrations) of the USA and the Republic of South Africa to exchange information automatically under the provisions of the DTT between these countries.

• The Standard for AEOI in tax matters (CRS) is the Global Model for AEOI under the MCAA of which South Africa is a signatory.

• The CRS is a standardized automatic exchange model, which builds on the FATCA IGA to maximize efficiency and minimize costs, except that the ambit is now extended to all foreign held accounts and not only those of US citizens. South Africa is also one of the early adopters of the CRS and is committed to commence exchange of information automatically on a wider front from 2017, together with over 90 other jurisdictions.

• For years of assessment commencing 1 January 2016, the ultimate parent company of a MNE group that is tax resident in South Africa will be required to file a CbC report to SARS. The threshold for reporting to SARS is a consolidated MNE group turnover of at least ZAR 10 billion in the fiscal year prior to the year in which the CbC report must be submitted.

• The DTC has recommended that SA works with the OECD to publish, on a regular basis, a new Corporate Tax Statistics publication which would compile a range of data and statistical analyses to the economic analysis of BEPS in an internationally consistent format.

158





• South Africa legislation places an obligation on facilitators of tax schemes to disclose certain types of transactions to the revenue authority. These transaction types are listed as reportable arrangements.

• The list of reportable arrangements has been extended to encompass additional transaction types that the revenue authority views as being high risk.

n/a


• For years of assessment commencing on or after 1 October 2016, companies which transact cross-border with connected persons whereby such transactions exceed or are reasonably expected to exceed ZAR 100 million are required to maintain TP policy documentation.

• As noted above, it was recommended by the DTC that a binding general ruling (BGR) be issued to include a set of principles pertaining to the South African reality as well as the compulsory requirement for comparability adjustments due to a lack of local comparables.

• Due regard to be had for SMEs to ensure that no unnecessary burdens are placed on SMEs to maintain the same level of documentation as large corporates.

• Possible implementation of the safe harbour rule noted above.


• MAP is contained in the majority of DTTs and can be followed to resolve international tax disputes.

• The South African Revenue Service have issued guidance in this regard to assist taxpayers on the processes to follow in order to utilize the MAP.

• The DTC has recommended SARS to be forceful in assisting taxpayers with MAP.

• APA process will also assist in reducing possible disputes.

159





• A multilateral convention on mutual administrative assistance on tax matters (as amended by the protocol) was entered into with date of entry into force of 1 March 2014.

• A multilateral African Tax Administration Forum Agreement on Mutual Assistance in Tax Matters and a multilateral Southern African Development Community Agreement on Assistance in Tax Matters was also signed and ratified in South Africa but has not yet come into effect.

• Various tax exchange of information agreements have also been entered into. These include Argentina, Bahamas, Barbados, Belize, Bermuda, Cayman Islands, Cook Islands, Costa Rica, Gibraltar, Grenada, Guernsey, Jersey, Liberia, Liechtenstein, Samoa, San Marino, St Kitts and Nevis and Uruguay.

• South Africa is one of the 85 signatories to the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which was signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

• New tax AEOI is in the process of negotiation with Andorra, Brunei Darussalam, Dominica, Isle of Man, Jamaica, Macao SAR, Maldives, Marshall Islands, Monaco, Panama, St. Lucia and Turks and Caicos Islands.



160



Country South KoreaPKF member firm PFK SEJONG

Your contact Charlie Kim




2 Hybrids• In a commitment to implement the hybrid mismatch rules recommended by BEPS Action 2, new tax statute

provision under Law for coordination of International Tax Affairs (the “LCITA”) came into effect starting from January 2018 to limit expense deductions for hybrid mismatch arrangements.

n/a

3 CFCs• No specific action taken yet. However, the LCITA and its presidential enforcement decree contain some

procedures similar to CFC rules.n/a


• A thin capitalisation rule in Korea has existed for quite a long time in Korea where the deduction of interest relating to the debt from an overseas controlling shareholder is disallowed if the debt to equity ratio exceeds 2:1 (6:1 in case of a financial institution). However, a new provision under LCITA, which came into effect starting from January 2018, reflects the OECD’s recommendation (BEPS Action 4) on the limitation of interest expense deductions where net interest deduction claimed by a domestic company for international transactions will be limited to 30% of the adjusted taxable income of the domestic company.

n/a

5 Harmful tax practices• New LCITA provision sets out that Korean tax authorities are allowed to exchange information relating to

taxpayers who filed Bilateral APA with those corresponding tax authorities for APA review, approval, and follow-up management purposes starting from February 2018.

n/a

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• In May 2016, South Korea signed an amended double taxation treaty with the Czech Republic on a separate basis as both countries did not designate each other as Covered Tax Agreements (CTAs), i.e. tax treaties to be amended through the MLI.

• This is the very first DTT that South Korea has amended in such a way that it fully reflects Action 6 of BEPS, which is one of the minimum standards.

n/a

7 PE status

• The latest reform proposal include two significant changes in respect of permanent establishment (PE) of a foreign company in Korea.

• One of the proposed changes strengthens the criteria for exemptions of specific activities from the PE status. For example, place used by a foreign company solely for the purpose of purchase of assets, storage and holding of assets not for sale, and processing a foreign company’s own assets shall be exempted from the definition of PE only if the specific activity carried on at the place is of a preparatory or auxiliary character.

• The second change was to expand the scope of dependent agent and clarify the types of contracts to determine the dependent agent status. Currently, a dependent agent would exist when the agent has and habitually exercises an authority to conclude a contract on behalf of a foreign company. Under a proposal, it is expanded to include situations where: i) an agent having no authority to conclude contracts on behalf of a foreign company repeatedly plays a principal role in the course of concluding contracts; and ii) contracts are routinely concluded without modification to material elements of contracts by the foreign company.

n/a

8 TP - intangibles • No specific action taken yet n/a





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• South Korea became one of 39 signatories of CbC Multilateral Competent Authority Agreement (“MCAA”) as of 30 June 2016.

• As the U.S. is not a part of CbC MCAA signatories, South Korea signed a separate Bilateral Competent Authority Agreement on the exchange of CbC reports with the US on 22 June 2017.

• Starting from FY2016 and onwards, South Korea requires corporate taxpayers in Korea to file both the local and master files if all of the following thresholds are satisfied:

- Annual aggregate volume of intercompany transaction(s) exceeds KRW 50 billion; and - Annual revenue exceeds KRW 100 billion.

• For CbC reporting, when the Korean taxpayer is an ultimate parent company of its group / MNE and satisfies the following threshold, then it is required to submit a CbC report to the Korean tax authorities:

- Sales revenue exceeding KRW 1 trillion (approx. EUR 750 million) per consolidated financial statements for the preceding year.

n/a



• South Korea is one of the 85 signatories to the MLI. The MLI, which was signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a

163



Country SpainPKF member firm PKF Attest

Your contact Gonzalo Vélez / Álvaro Beñarán / Cecilia Flores

Email [email protected] / [email protected] / [email protected]


1 Digital economy• The Spanish government has modified domestic VAT Law including the EU Council Implementing

Regulation (EU) No 1042/2013 of 7 October 2013, through Law 28/2014 (of 27 November 2014). In particular, VAT on business to customer digital services, applicable since January 2015.

• Council of Ministers has included in the draft State Budget Plan 2019 a proposal to create a Digital Services Tax. The State Budget for 2019 still pending to be approved.

2 Hybrids

• Expenses derived from controlled transactions will not be deemed as tax deductible in case the related counterparty considers the related income as tax exempt or with an effective tax rate below 10%.

• Exemption for avoiding double taxation will not apply to dividends where the distribution gives rise to a tax deductible expense.

• EU PSD amendment has been implemented, disallowing the benefits of the Directive when transactions are only aimed to achieve a tax relief.

• Specific rule against profit-participating loans interest deduction.

• The new DTT signed between Japan and Spain (22 October 2018) incorporates the treaty-related BEPS minimum standards (i.e. neutralising the effects of hybrid mismatch arrangements).

n/a

3 CFCs

• Income derived from foreign subsidiaries is imputed provided that:

- A participation >50% is held; - A source tax rate applicable to such income is <75% of the applicable Spanish tax rate.

• UCITs under Directive 2009/65/CE are excluded if incorporated and domiciled in an EU Member State.

• Council of Ministers has included in the draft State Budget Plan 2019 a proposal to create a Financial Transaction Tax. The State Budget for 2019 still pending to be approved.

164





• Net financial expenses are only tax deductible up to the higher of EUR 1 million or 30% of EBITDA.

• Financial expenses within groups of companies aimed to (i) acquire shares of other companies or (ii) perform capital contributions to other companies of the group, will not be tax deductible unless a valid economic reason other than achieving a tax relief is proved.

• Note: EU Member States like Spain are subject to the Anti-Tax Avoidance Directive (ATAD) published in January 2016. The ATAD contains several measures regarding Action 2 and Action 4, which should be adopted by Member States no later than 1 January 2024.

n/a


• New measures aimed at specifically fighting harmful tax practices and artificial instruments leading to tax savings or designed for tax purposes were adopted by Law 27/2014 from 27 November 2014 (Spanish Income Tax Law) in its article 23. It was later modified by Law 48/2015 from 29 October 2015 (Spanish Budget Act) regarding the formula to be applied to deductions.

• Law 48/2015 also provides a new approach that will allow benefits granted with respect to IP income in line with the expenditures linked to generating such income. The amendments will enter into force as from 1 July 2016.

• On 4 July 2018, the Spanish 2018 Budget Law made effective the amendments introduced in the draft on 5 April 2018 (Spanish 2018 draft Budget Law), related to the Patent Box regime to be extended to utility models, to copyrighted advanced software produced as a result of research and development activities and to supplementary protection certificates for medicinal and phyto-pharmaceutical products. (only applicable for agreements signed before 1 July 2016).

n/a


• Anti-abuse rules regarding EU dividend and royalty payments are amended by Law 26/2014 from 27 November 2014 (Spanish Non-Residents Tax Law).

• “Beneficial owner” clauses are being negotiated in new DTTs.

• The new DTT signed between Japan and Spain (22 October 2018) incorporates the treaty-related BEPS minimum standards (i.e. preventing the granting of treaty benefits as the new treaty includes LoB clause and a PPT).

• The MLI has been signed on 7 June 2017 by Spain. Expected to be in force in 2018.

165




7 PE status

• Definition of PE and interpretation of the “fixed place of business” and “dependent agent”. Case number 182/2012 from the Spanish High Court (Audiencia Nacional) issued a decision where it upheld that a Spanish entity belonging to an international group constitutes a PE of an Irish entity of the group under both the “fixed place of business” and the “dependent agent” clauses of the Spain-Ireland tax treaty.

• The new DTT signed between Japan and Spain (22 October 2018) incorporates the treaty-related BEPS minimum standards (i.e. including the new definition of agency PE).

n/a








• Council Directive (EU) 2018/822, of 25 May 2018 amending Directive 2011/16/EU with regard to mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements. Member States shall adopt and publish, by 31 December 2019, the laws, regulations and administrative provisions necessary to comply with this Directive.

• Spanish Tax Authorities have not yet transposed the Directive into domestic law.

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• TP documentation (Master and CbC files) should not be mandatorily filed but should be held at the disposal of the tax authorities, if requested. A year in advance, the Spanish subsidiary should inform the designated group entity and tax residence where the CbC report will be submitted.

• On 30 December 2017, Spanish Royal Decree 1074/2017, clarifies that Spanish entities or PEs located in Spain that belong to an MNE group are not subject to Spanish CbC report local filing obligations, under certain circumstances.

• Documentation requirements have been simplified for groups with a global turnover not exceeding EUR 45 million.

• CbC report will be mandatory as of 2016 for groups with a global turnover exceeding EUR 750 million.

• On 27 January 2016, Spain has signed the MCAA for the automatic exchange of CbC reports.

n/a



• (Spain will be included in the third group of countries of the MAP).

• On 12 March 2018, the OECD’s peer review report on Action 14 has concluded that Spain meets most of the elements of the Action 14 minimum standard. Next stage will monitor Spain’s efforts to address any shortcomings identified in its Stage 1.

• The new DTT signed between Japan and Spain (22 October 2018) incorporates the treaty-related BEPS minimum standards (i.e. for unresolved issues under this treaty the MAP provision must be submitted to arbitration if the person so requests).

• The report will be published in 2018.


• Spain is one of the 85 signatories to the Multilateral Instrument - MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which was signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

• Spain is one of only 25 countries that decided to apply mandatory binding arbitration.

• On 13 July 2018, Spain's Council of Ministers approved the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI), signed on 7 June 2017. Once the ratification procedure is complete, Spain must deposit its ratification instrument to bring the MLI into force for its covered agreements (tax treaties).

• It is expected that first MLI implementations will be done in the course of 2018.



167



Country Sultanate of OmanPKF member firm PKF L.L.C.

Your contact Percy R. Bhaya



1 Digital economy • No specific action taken yet. See * below

2 Hybrids • No specific action taken yet. See * below

3 CFCs • No specific action taken yet. See * below

4 Interest deductions • No specific action taken yet. See * below

5 Harmful tax practices • No specific action taken yet. See * below

6 Prevent treaty abuse • No specific action taken yet. See * below

7 PE status • No specific action taken yet. See * below

168









11 BEPS data collection • No specific action taken yet. See * below



13 TP – documentation • No specific action taken yet. See * below

14 Dispute resolution • No specific action taken yet. See * below

15 Multilateral instrument • No specific action taken yet. See * below

* Please note that Oman is not an OECD member state. Furthermore, Oman Income tax law doesn’t provide for any of the 15 actions laid down under the OECD’s action plan on BEPS. Hence, no specific action has been taken and/or is in the pipeline on any of the 15 action points laid down under the BEPS action plan in Oman.

169



Country SwazilandPKF member firm PKF Chartered Accountants Swaziland

Your contact Kelly Phillips

Email [email protected]ОО; [email protected]




3 CFCs • There are no controlled foreign company rules in Swaziland.

• SIPA is currently functional but it is not a one-stop-shop for foreign investors.

4 Interest deductions• In Swaziland interest is deductible as long as it is incurred in the production of income. There are no thin

capitalisation rules in Swaziland.n/a



7 PE status

• PE in Swaziland is determined according to physical presence. The definition of PE means a fixed place of business through which the business of the enterprise is wholly or partly carried on. An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries business in that State through a broker, general commission agent or any other agent of an independent status where such persons are acting in the ordinary course of their business.

n/a

170




8 TP - intangibles• No specific action taken yet. Swaziland does not have transfer pricing legislation. However, under the anti-

avoidance provision the Revenue Authority might challenge the arm’s length nature of a transaction.n/a


• No specific action taken yet. Swaziland does not have transfer pricing legislation. However, under the anti- avoidance provision the Revenue Authority might challenge the arm’s length nature of a transaction.

n/a


• No specific action taken yet. Swaziland does not have transfer pricing legislation. However, under the anti- avoidance provision the Revenue Authority might challenge the arm’s length nature of a transaction.

n/a




13 TP – documentation • There is currently no transfer pricing legislation. n/a

14 Dispute resolution • None. Swaziland does not have a tax tribunal. n/a

15 Multilateral instrument • Swaziland has not signed the MLI. n/a

171



Country SwedenPKF member firm PKF Revidentia AB

Your contact Karin Rosén



1 Digital economy • The EU VAT directive applies and is already implemented into domestic law. n/a

2 Hybrids• Sweden does not have the proposed legislation. The MoF is working on the question whether there should be

changes in Swedish law or not.n/a

3 CFCs• Sweden already has legislation in this area. It differs somewhat from the report’s recommendations. It is not

clear whether the Swedish rules will be changed. The issue lies with the MoF.n/a


• On 21 March 2018 the Swedish Government presented a draft referral to the Council on Legislation with a proposal intended to counteract tax planning based on interest deductions, and which is to contribute to increased neutrality in the tax system through an expansion of the tax base. The draft referral which has now been presented to Council on Legislation proposes a maximum deduction of 30% of fiscal EBITDA. A reduction in the corporate tax rate is also put forward in the new proposal at 20,6%. This will take place in two stages. The first reduction is proposed to come into effect on 1 January 2019 with a decrease to 21.4%, and the remaining reduction, down to 20.6%, will come into effect on 1 January 2021. The new regulations are proposed to come into effect on 1 January 2019.

n/a


• Sweden does not have any preferential tax regimes and does not provide any such preliminary covered by the report. Sweden will not send any information. However, Sweden will receive information on advance notice, as provided in other countries, where there is a transaction that affects one in Sweden and the preliminary decision includes a favourable tax regime. Information will be subject to confidentiality in Sweden.

n/a

6 Prevent treaty abuse• No specific action taken yet. No matter how minimum standard becomes a part of the DTTs between Sweden

and other countries, it is required that new treaties or amendments to treaties are approved by new legislation for it to apply in Sweden.

n/a

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7 PE status• No specific action taken yet other than the definitions followed in OECD Model DTT. However, there is a need

for a change in Swedish law. The issue lies with the MoF.n/a

8 TP - intangibles• Sweden has laws about how pricing will take place between associated enterprises. The legislation is based

on the arm’s length principle. No need for change in law.n/a





11 BEPS data collection• The Tax Agency will monitor the area and developments to ensure that the BEPS implications are reflected in

Swedish taxation.n/a


• Sweden currently lacks rules on mandatory reporting for companies or advisers. The issue of such rules to be introduced lies with the MoF.

n/a


• Sweden has implemented BEPS Action 13, and requires the master and local file documentation format for TP documentation.

• CbC reporting legislation entered into force on 1 April 2017, effective for financial years starting after 31 December 2015.

• Multinational groups with a total turnover of at least SEK 7 billion, or a corresponding amount in foreign currency, are subject to the CbC reporting rules. Generally, this means that the ultimate parent entity is required to file a CbC report for the entire group in the country where it resides. Swedish parent companies of groups exceeding the threshold are required to file the CbC report with the Swedish Tax Agency within 12 months of the end of the financial year covered by the report.

• Legislation introducing documentation requirements based on the BEPS Action 13 Master File-Local File concept was introduced on 1 April 2017, effective for financial years starting after 31 March 2017.

n/a

173




14 Dispute resolution • Sweden meets the minimum standard. New amendments to tax treaties need to be approved by new legislation for it to apply in Sweden.

n/a


• Sweden participates in the group that will present a proposal on the joint agreement. Whether Sweden signs a joint agreement or renegotiates its individual tax agreements needs to be approved by legislation to take effect in Sweden.

• Sweden is one of the 85 signatories of the MLI. The MLI, which was signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a

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Country SwitzerlandPKF member firm PKF Consulting AG

Your contact Margarita Baeriswyl



1 Digital economy• No specific action taken yet and not yet known

whether and how this will be implemented.n/a

2 Hybrids • No specific action taken yet.

• On 7 June 2017 Switzerland signed the MLI on the implementation of tax related measures against BEPS. Along with the list of treaties to be "automatically" amended to adapt to BEPS Action 2 (also 6, 7 and 14), Switzerland submitted a provisional list of reservations and notifications in respect of the provisions of the MLI.

• Relating to BEPS Action 2, Switzerland has made reservations in order not to apply article 3 (fiscally transparent entities) and article 4 (dual resident entities). However, notified to apply to its residents the switch- over clause (option A) as per article 5.

• The definitive MLI positions will be known upon “ratification” of the MLI. On 22 August 2018, the Federal Council adopted the dispatch on the multilateral convention to implement tax treaty related measures to prevent BEPS. The dispatch was submitted to Parliament. Entry into force is not anticipated prior to 2019; therefore, it remains to be seen whether and how this will be implemented in practice.

3 CFCs• No specific action taken yet. Switzerland does

not have CFC legislation and there is no intention to introduce a CFC regime at this point in time.

n/a


• No specific action taken yet. The current view is that the existing thin capitalisation rules are sufficient to prevent unreasonable interest deductions.

n/a

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5 Harmful tax practices • No specific action taken yet.

• Swiss tax reform III including BEPS was rejected by public vote on 12 February 2017. As a “substitute”, on 6 September 2017, the Federal Council initiated the consultation on tax proposal 17. The duration of the consultation procedure is three months. The Federal Council submitted its dispatch to the Parliament in Spring 2018. Consequently, entry into force of the new legislation is expected no earlier than 2020. As part of the legislative process for tax proposal 17, preferential tax regimes are expected to be abolished and a new patent box regime implemented in line with Action 5 recommendations.

• The Federal Council adopted the total revision of the Tax Administrative Assistance Ordinance and brought it into force on 1 January 2017. The new ordinance defines the framework and the procedures required for the spontaneous exchange of information including those that apply for the exchange of information on advance tax rulings. The first spontaneous exchanges of information with Switzerland are taking place from 1 January 2018 onwards and apply for tax periods starting from then. For the specific case of the advance tax rulings, the ordinance defines which categories are subject to spontaneous exchanges and which countries have to be informed. Regarding the relevant timeframe and scope:

• All new rulings (falling in one of the defined categories) are subject to the spontaneous exchange of information as from 1 January 2018.

• Tax rulings (falling in one of the defined categories) issued after 1 January 2010 and still effective on 1 January 2018 (or 2017 in case of specific agreements) are subject to the spontaneous exchange of information.

6 Prevent treaty abuse• No specific action taken yet. Switzerland already

has either PPT or LoB clauses in certain tax treaties.

• With the signed MLI Switzerland did not express any reservations on article 6 (purpose of a treaty). In respect of article 7 (prevention of treaty abuse), Switzerland notified the respective provisions in its treaties but did not make an explicit choice. Thus, the PPT will apply as the minimum standard and default option. More treaties and the multilateral treaty are expected to include the PPT clause in the future. Furthermore, Switzerland has reserved the right for articles 8 to 11 (specific anti-abuse rules / saving clause to preserve the rights to tax its own residents) not to apply to its treaties.

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7 PE status • No specific action taken yet.• With the signed MLI Switzerland has reserved its

right not to apply any of the provisions regarding the avoidance of PE status (articles 12 – 15).

8 TP - intangibles• In the absence of specific TP rules in domestic law, the OECD TP guidelines form

the basis for determining the arm’s length nature of intragroup transactions for Swiss tax purposes. As such, the new guidelines are valid with immediate effect.

n/a





11 BEPS data collection• The Federal Council has tasked the Federal Department of Finance with assessing

possible changes to national legislation that should be considered based on the BEPS recommendations.

n/a


• No specific action taken yet. Switzerland has declared that it is currently not considering participating in this action.

n/a


• Switzerland does not plan to make transfer pricing documentation compulsory, but it is expected to monitor the situation. Taxpayers may need to make available the Masterfile that already must be prepared as part of tax audits.

• Switzerland has introduced legislation to make CbC reporting mandatory for Swiss- based multinational companies if the group revenue exceeds the threshold defined by the OECD and signed the MCAA for the automatic exchange of CbC reports. The corresponding law and the multilateral agreement were adopted by Parliament in the 2017 summer session. Given that a referendum was not called on these proposals, the Federal Council decided during its meeting of 17 October 2017 to bring the law into force on 1 December 2017 and the agreement in December 2017. Multinationals in Switzerland will thus be obliged to start drawing up a CbC report from tax year 2018 onwards. Switzerland and its partner states will therefore exchange CbC reports as from 2020.

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14 Dispute resolution• No specific action taken yet. Switzerland has committed to binding

arbitration (subject to implementation of the MLI; see hereafter).

• With the signed MLI Switzerland will meet the minimum standards by agreeing in its tax treaties the maximum time period during which jurisdictions can make adjustments to the profits of domestic tax payers (article 16). Switzerland notified the existing provisions on transfer pricing adjustments in its treaties to be amended; thus, article 17 of the MLI does not apply. Switzerland reserves the right to replace the two-year period provided by article 19 of the MLI to resolve a case by mutual agreement between the competent authorities within a three-year period. Switzerland did not comment on articles 20 - 23 of the MLI.


• The Federal Council has already approved this roadmap, and the Federal Department of Finance has been instructed to take into account the BEPS actions when negotiating new DTTs.

• Switzerland is one of the 85 signatories to the MLI. The MLI, which was signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

• On 22 August 2018, the Federal Council adopted the dispatch on the multilateral convention to implement tax treaty related measures to prevent BEPS. The dispatch was submitted to Parliament. Entry into force is not anticipated prior to 2019; therefore, it remains to be seen whether and how this will be implemented in practice.

• The dispatch was submitted to Parliament. Plan to implement the MLI to "automatically" amend existing Swiss tax treaties, to adapt to BEPS Actions 2, 6, 7 and 14.

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Country TaiwanPKF member firm PKF Taiwan

Your contact Ronnie Chang / Wisdom Lee



1 Digital economy

• For the tax fairness between sales of physical and virtual channels, “Regulations regarding business tax and income tax levied from online transactions” was proclaimed in 2005. Also, it was stated in related regulations proclaimed in 2017 that for cross-border electronic service providers having no fixed place of business in Taiwan but providing services to individuals within Taiwan, applications for tax registration are mandatory when their annual sales revenues exceed TWD 480,000. Moreover, from 2017, remunerations obtained from cross-border electronic services for receivers within Taiwan (including individuals, for-profit entities or any organizations) that are provided by for-profit entities and any organizations registered overseas are subject to corporate income tax in Taiwan.

n/a

2 Hybrids

• The goals for the policies regarding tax treaties in Taiwan are to avoid double taxation, to prevent tax evasion, to encourage mutual economic and trading relationship, mutual investments, cultural exchange and interaction with people in different regions. All agreements that have been settled are mainly based on the samples of tax agreements from OECD and UN with considerations made regarding mutual conditions of politics, finance, economy and trading.

n/a

3 CFCs

• In 2016, an amendment was made to the “Income Tax Act” and Article 43-3 was added which states that for any for-profit enterprise in Taiwan and its related parties (in)directly holding 50% or more of shares or capital of a foreign affiliated enterprise registered in a country or jurisdiction with low-tax burden, or having a significant influence on such a foreign affiliated enterprise, the surplus earnings of the foreign affiliated enterprise shall be recognized as the for-profit enterprise’s investment income which shall be calculated based on the ratio and holding period of the shares or capital held, and such investment income shall be included in the taxable income of current year.

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3 CFCs (Continued)

• In addition, in order to build a more thorough anti-tax avoidance system and to prevent tax avoidance through CFCs set up by individuals after our regulations regarding CFC set up by for-profit entities are enforced, in 2017, article 12-1 of the “Income Basic Tax Act” was amended and it states that if any individual and his/her related parties (in)directly holding up to 50% of shares or capital of a foreign affiliated enterprise registered in a country or jurisdiction with low-tax burden, or having a significant influence on such a foreign affiliated enterprise, and the individual or himself/herself with his/her spouse and relatives within the second degree of kinship holding up to 10% of shares or capital of the foreign affiliated enterprise, surplus earnings of the foreign affiliated enterprise shall be recognized as the individual’s business income which shall be calculated based on the ratio of the shares or capital held and be included in the individual’s basic income of current year. Summarised, the above amendment was made with the intention to have individual shareholders included in the regulations regarding CFC.

n/a


• In 2011, article 43-2 in “Income Tax Act” was amended and proclaimed. And “Guidance for investigation regarding expenses of for-profit entities incurred due to interest paid for related-party debt that are forbidden to be recognized as expenses or losses” was proclaimed later in the same year. Both of which limit the maximum amount for interest recognizable since 2011. According to article 5 in the above guidance, when the ratio of related-party debt to equity of the entity exceeds 3 to 1, the interest for the exceeded part of debt shall not be listed for deduction in the filing of income tax return for the entity.

n/a


• In 2009, amendment was made to the “Tax Collection Act” and Article 12-1 was added which states that laws related to tax matters shall be construed based on the essence of principle of taxation by law and according to the purpose of legislation for respective laws, taking the economic impact and the fairness of substantive taxation into consideration. When facts for the constituent elements of tax levied are considered, it shall be based on how those facts are actually related economically, to whom the actual economic interest derived belongs and who will benefit from it.

• Also, an amendment has been made to the “Income Tax Act” and Article 43-1 was added which regulates the “Non-arm's Length Transactions” of companies in Taiwan with their affiliated companies overseas to prevent their avoidance of income tax burden in Taiwan through TP. Moreover, in 2004, “Regulations Governing Assessment of Profit-Seeking Enterprise Income Tax on Non-Arm's-Length TP” was proclaimed to enhance the efficiency for investigations of cases concerning avoidance of corporate income tax, to make sure that substantive taxation is realised and to maintain the fairness of taxation.

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• The goals for the policies regarding tax treaties in Taiwan are to avoid double taxation, to prevent tax evasion, to encourage mutual economic and trading relationship, mutual investments, cultural exchange and interaction with people in different regions. All agreements that have been settled are mainly based on the samples of tax agreements from OECD and UN with considerations made regarding mutual conditions of politics, finance, economy and trading.

n/a

7 PE status

• In 2016, amendment was made to the “Income Tax Act” and Article 43-4 was added which states that any for-profit enterprises overseas established based on their local laws but having their actual operating office set within Taiwan shall be deemed as for-profit enterprises having head offices within Taiwan and shall be subject to corporate income tax according to the Income Tax Act and other relevant regulations.

n/a

8 TP - intangibles

• Regulations Governing Assessment of Profit-Seeking Enterprise Income Tax on Non-Arm's-Length Transfer Pricing was amended in 2017, and in the newly added Article 21-1, it is stated that if a profit-seeking enterprise that is resident in the ROC is a constituent entity of an MNE Group, it shall prepare a master file when filing income tax returns. And intangibles of the MNE shall be part of its master file. It is mandatory to provide the following: 1) a general description of the MNE’s overall strategy for the development, ownership, and exploitation of its intangibles 2) A list of intangibles of the MNE Group that is important for transfer pricing purposes and which entities legally own them 3) A list of important agreements among constituent entities related to intangibles 4) A general description of the group’s transfer pricing policies related to R&D and intangibles 5) A general description of any important transfers of interests in intangibles among constituent entities during the fiscal year in question.

n/a


• Regulations Governing Assessment of Profit-Seeking Enterprise Income Tax on Non-Arm's-Length Transfer Pricing was amended in 2017, and in the newly added Article 21-1, it is stated that if a profit-seeking enterprise that is resident in the ROC is a constituent entity of an MNE Group, it shall prepare a master file when filing income tax returns. And in addition to the above mentioned intangibles, the master file should also include the following elements regarding MNE’s intercompany financial activities: 1) A general description of how the group is financed 2) The information for identification of any members of the MNE Group that provide a central financing function for the group 3) A general description of the MNE’s general transfer pricing policies related to financing arrangements between constituent entities.

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• It is stated in the Regulations Governing Assessment of Profit-Seeking Enterprise Income Tax on Non-Arm's-Length Transfer Pricing that a profit-seeking enterprise undertaking controlled transactions, when filing the current-year income tax returns or making a current-year final report, shall prepare a TP report. In the report summaries of all controlled transactions and the result of controlled transaction analysis.

n/a




• In 2017, “Regulations Governing Assessment of Profit-Seeking Enterprise Income Tax on Non-Arm's-Length Transfer Pricing” was amended and it states that for-profit enterprises undertaking Controlled Transactions, when filing the income tax returns or final report for the year that the transaction was made, a related transfer pricing report shall be prepared. Also, if a for-profit domestic entity in Taiwan is a constituent entity of a Multinational Enterprise (MNE) group, an additional master file regarding the group shall be prepared when filing its income tax returns. If the domestic company is the ultimate parent entity of a MNE group, in addition to the two reports mentioned above, a Country-by-Country report shall also be prepared according to the format prescribed by related regulations.

n/a

14 Dispute resolution • No specific action taken yet. Switzerland has committed to binding arbitration (subject to implementation of the MLI; see hereafter).

n/a


• Due to its controversial international status, Taiwan is not able to participate in the Automatic Exchange of Financial Account Information project to actively exchange financial information with other countries in the world. However, based on the principle of the project, Taiwan will sign agreements of financial information exchange respectively with those countries that have signed tax treaties with Taiwan in the hope that these multiple bilateral agreements can be as beneficial as one multilateral agreement.

n/a

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Country ThailandPKF member firm PKF Thailand

Your contact John Casella





3 CFCs • There is no CFC legislation in Thailand. n/a

4 Interest deductions• No specific action taken yet. There are no thin cap rules. However, foreign investment law restricts the debt-

equity ratio to 7:1.n/a




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• Thailand has signed a memorandum of understanding concerning the compliance with the Foreign Account Tax Compliance Act (FATCA) with the US government.

n/a


• There are no mandatory TP documentation requirements. Closely aligned with the OECD TP guidelines, the domestic TP guidelines assist Thai tax authorities when conducting a TP audit.

• On 21 November 2018, the Transfer Pricing Act was gazetted and will become effective as from 1 January 2019.

- "Related parties" are defined as two or more legal entities wherein:

• A person holds at least 50% (directly or indirectly) of the share capital of the other entity;

• A shareholder holds at least 50% (directly or indirectly) of the share capital of both entities; or

• A person has a dependent relationship through participation in the capital, management or control of another entity as prescribed by the Ministerial Regulations.

- An entity with annual revenue not exceeding THB 200 million will be exempted from requirements to prepare and submit a report.

• Thailand joined the BEPS Inclusive Framework in June 2017. As a result, Thailand is looking into incorporating country-by-country (CbC) and Master File reporting in its transfer pricing documentation rules.



184



Country TunisiaPKF member firm PKF Cabinet Lassaad Marwani&co

Your contact Lassaad Marouani



1 Digital economy • Public Private Partnership in this matter. n/a


3 CFCs • No specific action taken yet. Tunisian tax law does not contain CFC rules. n/a

4 Interest deductions• There are no thin capitalisation rules in Tunisia. However, interest payments on shareholder loans may be

requalified into dividends under certain circumstances.n/a



7 PE status• PE is defined largely as any centre of activity that must be taxed according to duration and activity

(construction, services and others).n/a


185












• On 10 December 2018, the draft Finance Law 2019 was approved by the parliament. It is expected to apply as from 1 January 2019. Companies realizing gross annual turnover equal to or exceeding TND 20 million will be required to submit an annual transfer pricing return according to a specific form provided by the tax authority at the same time of filing the corporate tax return. The transfer pricing return includes detailed information related to the group of entities to which the company is related and information related to the entity itself.

• Country-by-country (CbC) reporting requirements will be introduced for resident companies which meet the following cumulative conditions:

- The entity is preparing consolidated financial returns;

- The entity is owning or controlling (directly or indirectly) a company or several companies;

- The entity is realizing a consolidated net turnover of TND 1,636,800 million for year 2018; and

- The entity is not owned by another Tunisian resident company which is required to file the CbC report or by a non-resident company which is required to file the CbC report under a foreign similar legislation.

n/a

14 Dispute resolution • A dispute resolution rule is included in all Tunisian DTTs. n/a

15 Multilateral instrument• Tunisia has signed the MLI on 24 January 2018 (see http://www.oecd.org/tax/treaties/beps-mli-position-

tunisia.pdf).n/a

http://www.oecd.org/tax/treaties/beps-mli-position-tunisia.pdf

http://www.oecd.org/tax/treaties/beps-mli-position-tunisia.pdf

186



Country TurkeyPKF member firm PKF İstanbul

Your contact Dr. Abdülkadir Оahin / Emrah CebecioОlu



1 Digital economy

• On 5 December 2017, Law No.7061 approved by the Turkish Parliament was gazetted, introducing among others VAT as from 1 January 2018 with regard to non-resident persons (physical or legal) who engage in e-commerce activities with Turkish resident individuals who are not VAT taxpayers in Turkey. On 31 January 2018, the Turkish tax authority issued a communiqué regarding this tax liability providing a transition period for the first tax return. Non-resident service providers should declare the VAT by registering as a “VAT Liability Exclusive to the Electronical Service Suppliers” in Turkey with a registration form, which has not yet been issued. The scope of the e-services is are not explicitly stated in the Communiqué. It is therefore understood that all services provided electronically and through online means would fall under the scope of e-services.

n/a


3 CFCs

• No specific action taken yet. CFC rules already exist in Turkey. They apply where a resident company has at least a 50% direct or indirect interest (share capital or voting rights) in a non-resident company. The CFC profits may be taxable in Turkey if:

- At least 25% of the CFC's gross profits consists of passive income, such as dividends, interest, rents, licence fees or capital gains;

- The taxes levied on the CFC's profits are similar to corporate or individual income taxes

- The tax burden on the CFC's commercial balance sheet profits is less than 10%; and

- The CFC's total turnover in the relevant taxable period is more than the foreign exchange equivalent of TRL 100,000 (approximately USD 33,500).

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• No specific action taken yet. Thin cap rules already exist in Turkey. A “related party” is a person holding, directly or indirectly, at least 10% of the shares or voting rights of the other party. Borrowings from related parties that exceed a debt-to-equity ratio of 3:1 are considered to be disguised capital. For borrowings from related parties that are banks or financial institutions, half of the borrowings are taken into consideration in performing the calculation for disguised capital.

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5Harmful tax practices(Continued)

• Any payment made in cash or via a bank account to a corporation (including a branch of a resident corporation) that is operational or established in a country regarded by the Turkish Council of Ministers to undermine fair tax competition (through other practices or taxation) may be taxed in Turkey through the application of withholding tax at a rate of 30%. The Turkish Council of Ministers has not yet determined which countries receiving payments will be considered as ‘tax havens’. With respect to withholding tax, the Council of Ministers is granted the authority to determine the rate of taxation and specify the scope of work to be done with respect to payments made to purchase goods or participation stocks, for rent, for sea or air transportation, and payments which must be made for the completion of work done. However, while the authority is given to the Council of Ministers, there are two fundamental criteria regarding the determination of the countries which will be under the scope of such application. These are:

- Whether or not the taxation system of the other country to where the payments are transferred provides taxation opportunities as at the same level as the Turkish tax system; or;

- The information exchange mechanism.

• The Council of Ministers has not yet issued such a list of countries. On 19 October 2017, Decree No. 2017/10821 related to the Technology Developing Zones Law (Law No. 4691) was published in the Official Gazette. The Decree clarifies the implementation of the corporate and personal income tax exemption provided by the temporary article 2 of Law No. 4691. According to this article, income derived by technology development managing companies and taxpayers with software development and R&D activities in technology development zones is exempted until 31 December 2023. The main provisions of the Decree regarding implementation of the tax exemption are as follows:

- If the tax exempt income is derived from the alienation or leasing of intangibles, a patent or equivalent certificate is required; - Certificates equivalent to a patent certificate are the utility model certificate, design registration certificate, copyright

registration certificate, integrated circuit topography, etc.; - Taxpayers with income derived from intangibles not exceeding TRY 30 million (and net sales revenue of TRY 200 million)

may benefit from the tax exemption without any patent or equivalent certificate; - The upper limit of the tax exempt income is determined based on the eligible expenditures/total expenditures ratio; and - Eligible expenditures are defined as expenditures which are directly related to intangibles.

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6 Prevent treaty abuse • Turkey already has anti-abuse clauses in some of its tax treaties. More expected to be added either through tax treaties or the MLI.

n/a

7 PE status • The definitions of a “work place” and a PE have been revised in the draft Tax Procedure Law to cover digital/electronic commercial activities.

n/a

8 TP - intangibles • No specific action taken yet other than application of arm’s length principle to related party transactions. n/a

9 TP – capital related high-risk transactions • No specific action taken yet other than application of arm’s length principle to related party transactions. n/a

10 TP – other high-risk transactions • No specific action taken yet other than application of arm’s length principle to related party transactions. n/a



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• CbCR: Turkish resident parent companies of a multinational enterprise group whose consolidated revenues are TRY 2,037 billion and above for 2016 are required to submit CbCR electronically by the end of the 12th month following the fiscal year. For 2017 and beyond the revenue threshold shall be determined according to the Turkish Lira equivalent of EUR 750 million.

• Master File: Turkish corporate taxpayers, members of a multinational group whose assets and net revenues are TRY 250 million and above in the previous year should prepare a Master File by the end of the second month following the filing deadline of the corporate income tax return, ready for the TRA or those authorised for tax inspection if requested.

• Local File: Local files should be prepared by the time the corporate income tax returns are filed. A local file should consist of three different components; Appendix 2 Transfer Pricing Form, Appendix 4 Transfer Pricing Form and the annual Transfer Pricing report.

n/a



• Turkey is one of the 85 signatories of the MLI. The MLI, which was signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies. The Turkish Revenue Authority has also announced a list of its reservations with respect to the implementation of the MLI, see here: http://www.oecd.org/tax/treaties/beps-mli-position-turkey.pdf.

n/a

http://www.oecd.org/tax/treaties/beps-mli-position-turkey.pdf

http://www.oecd.org/tax/treaties/beps-mli-position-turkey.pdf

190



Country United Arab EmiratesPKF member firm PKF UAE

Your contact Sarika Dhameja



1 Digital economy• VAT was introduced from 1 January 2018 and extends to all goods and services, including digital products and

services as per the provisions of the law.n/a





• With a view to improving transparency and ensuring AEOI in the near future, the UAE has taken a few measures:

- The UAE Signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAC) on 21 April 2017, that would enable the UAE to fulfil its commitment to begin AEOI furthering the aim of preventing tax evasion. The convention is not yet in force in the UAE.

- The UAE has also signed the MCAA, to activate the system of exchange of tax information in accordance with the CRS.

- The country has signed 114 Double Tax Treaties (DTTs) (While most of these DTTs are signed, a couple of these decrees are either not issued or are not (yet) in force), 8 agreements on the exchange of information for tax purposes, in addition to an agreement with the US on FATCA.

- The UAE has joined the Global Forum on Transparency and Exchange of Information for Tax Purposes which is the key international body working on the implementation of information exchange international standards.

- The UAE MoF signed a Memorandum of Understanding with the OECD to build a partnership with regard to taxation matters, whereby the UAE has become a training hub for MENA for the exchange of information and is building a qualified and active network of tax experiences among the countries of the region.

- The UAE signed the MLI on 27 June 2018 to Implement Tax Treaty Related Measures to Prevent BEPS. Details are given under action point 15.

• Based on the above measures, one can say that ground work is being laid out to ensure that the UAE’s commitment to AEOI is progressing.

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• A tax residency certificate issued by the UAE MoF is mandatory for claiming benefit under UAE DTTs. This action was implemented by MoF in the first quarter of 2016. To ensure that only genuine assesses can claim a benefit, the following requirements / thresholds are prescribed by the MoF:

– Corporate (except offshore companies) – No specific provision in relation to corporate tax residency. However, tax residency issued to corporates that are incorporated in and managed from the UAE i.e. which meets the following requirements, namely:

• Company has been operating in the country for at least one year;

• Fixed place of business in UAE;

• At least one UAE resident director.

– Individuals

• A minimum physical presence of 183 days has been set to be able to apply for a tax residency certificate;

• Applicant must have been working in the UAE for at least one year. (Source: UAE MoF Website)

• The UAE signed the MLI on 27 June 2018 to Implement Tax Treaty Related Measures to Prevent BEPS. Details are given under action point 15.

n/a

7 PE status • No specific action taken yet n/a

8 TP - intangibles • No specific action taken yet n/a


• No specific action taken yet n/a


• No specific action taken yet n/a

11 BEPS data collection • No specific action taken yet n/a

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• FATCA Reporting for the Reporting Year 2017 began on 15 March 2018 (Source: UAE MoF Website)

• First CRS Reporting for Calendar Year 2017 is due in the month of September 2018 (Source: UAE MoF website)


• On 21 April 2017, the UAE signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAC), which includes provisions that would make it easier for the UAE to implement automatic exchange of CbC reports on the tax affairs of multinational corporations with other countries’ tax administrations under action point 13. The convention is not yet in force in the UAE.

n/a

14 Dispute resolution• The UAE signed the MLI in June 2018 to Implement Tax Treaty Related Measures to Prevent BEPS. Details are

given under action point 15.n/a


• The UAE signed the MLI to Implement Tax Treaty Related Measures to Prevent BEPS on 27 June 2018. The MLI allows signing jurisdictions to implement amendments to their mutually selected DTTs in a consistent manner.

• The UAE’s MLI Position Paper confirms the overall approach that the UAE intends to adopt with respect to suggested changes made by the OECD’s BEPS Project.

• Specifically, the UAE made key notifications such as:

- Including additional wording in the preamble of their DTTs stating that the DTTs should not be used for treaty abuse (BEPS Action 6).

- Including a PPT with the ability to refer to a competent authority for final assessment on the availability of treaty benefits (BEPS Action 6).

- Including addition wording in their DTTs to improve the dispute resolution process through MAP (BEPS Action 14).

- Retaining the existing PE definition in its DTTs, and elected not to adopt the expanded PE definition.

• Remaining measures - the UAE has opted to agree specific changes to their DTTs through bilateral negotiation with other jurisdictions. (Source: OECD Website – BEPS MLI position - UAE).

• The provisions of the MLI will be applicable to the UAE and its DTTs with other jurisdictions, once the changes are ratified through its legislative process.

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* The UAE is part of the Global Forum on Transparency and Exchange of Information for Tax Purposes [establishment in 2009 by G20 and OECD] which has 104 members. This forum has become the key international body working on the implementation of information exchange international standards. The UAE was the first Arab country to win a seat on the International Steering Committee, and in 2014 the Global Forum decided that the UAE will move forward to the second phase of evaluation which ended in 2017.

* The UAE MoF also organized a number of introductory workshops on the exchange of tax information, which witnessed the participation of tax experts from all over the world. These workshops discussed the common international standards in the field of tax reports, implementation mechanisms and approved legal frameworks. The aim was to develop a system for automatic exchange of tax information while complying with the rules of confidentiality of the exchanged tax information. (Source: UAE MoF Website)

* In May 2018, UAE became the 116th jurisdiction to join the Inclusive Framework on BEPS with a commitment to implement anti-BEPS minimum standards. (Source: OECD Website) Through joining the IF, UAE has committed to implementing the following four BEPS minimum standards:

- Action 5: Countering harmful tax practices

- Action 6: Countering tax treaty abuse

- Action 13: Country-by-country reporting at a minimum

- Action 14: Improving dispute resolution mechanisms

194



Country United KingdomPKF member firm PKF Cooper Parry

Your contact Suki Kaur



1 Digital economy

• The UK implemented measures to treat the country of consumption as the place of supply of digital supplies for VAT purposes with effect from 1 January 2015.

• The UK’s responses to action points 3 (CFCs), 7 (PEs) and 8-10 (TP) are intended to also address other aspects of action point 1.

• The Government released a position paper in November 2017 setting out its proposals for taxing the digital economy. The government is particularly focusing on taxing businesses serving UK consumers where there is significant ‘user-generated value’ created in the UK, e.g. online marketplaces and social media businesses.

• On 13 March 2018, the Government released an updated position paper. The new paper does not demonstrate any change in approach by the UK Government, instead giving an update on the Government’s thinking, providing further details on how it considers new rules might apply and considering the challenges that might need to be addressed as both long-term and interim measures are developed.

• From April 2020 the UK will introduce a new 2% tax on the revenues of certain digital businesses to ensure that the amount of tax paid in the UK is reflective of the value they derive from their UK users, known as the Digital Services Tax. The tax will apply to revenues from those activities that are linked to the participation of UK users, subject to a GBP 25 million per annum allowance. The UK will only apply the digital services tax until an appropriate long-term solution is in place by the G20 and OECD.

2 Hybrids

• The UK has enacted new measures through legislation contained in Finance Act 2016 to address hybrid mismatch arrangements with effect from 1 January 2017.

• On 16 November 2017, the UK enacted certain amendments to the anti-hybrid rules which were published in the Finance Bill (No 2) 2017 on 8 September 2017. This legislation brings back a number of measures which were originally included in the Finance Bill published in March but subsequently withdrawn in late April following the announcement of the snap General Election in June. The changes make three minor technical changes to the rules, the first change in respect

• The UK published draft legislation on the 6 July 2018 which made two proposed amendments to the anti-hybrid legislation which are expected to be enacted in December 2018. This is to ensure that the UK complies with the EU ATAD.

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2 Hybrids (Continued)

of local taxes has effect from 13 July 2017 while the other two changes have effect from 1 January 2017.

• On 1 December 2017, the UK Government published the Finance Bill 2017-18, which was enacted as the Finance Act 2018 on 15 March 2018. The Bill includes a number of changes to the anti-hybrid mismatch rules. Some of these changes apply retrospectively to when the legislation first came into effect on 1 January 2017 and some have effect from 1 January 2018.

3 CFCs

• The UK modernised its CFC rules in 2012 and the changes made at that time used elements of the various approaches referred to in the OECD report, so no further changes are considered to be necessary

• On 16 November 2017, the decision of the European Commission opening a formal State aid investigation into the group financing exemption contained within the UK’s CFC rules was made public. This decision sets out the scope of the Commission’s investigation and provides more detail of its position.

• The UK published draft legislation on the 6 July 2018 which made two proposed amendments to the UK CFC rules which are expected to be effective from 1 January 2019.


• On 16 November 2017, the UK enacted the new legislation incorporated in Finance Bill (No 2) 2017 to restrict relief for interest to 30% of EBITDA - a higher threshold will apply to groups of companies where their external borrowing exceeds 30% of EBITDA. Exemptions may apply where the total UK interest expense is less than GBP 2 million per annum. The new legislation takes effect from 1 April 2017.

• On 1 December 2017, the UK Government published the Finance Bill 2017-18, which was enacted as the Finance Act 2018 on 15 March 2018. This includes some amendments and clarification with respect to the corporate interest restriction rules. Certain of these amendments are treated as having effect on and after 1 April 2017, when the corporate interest restriction rules commenced. The remainder of the amendments have effect on and after 1 January 2018.

• Draft Legislation is expected to be enacted in December 2018 to correct and clarify particular aspects of these rules (e.g. capitalised interest)

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• Revisions to the Patent Box regime have been included in Finance Act 2016 to implement ‘nexus principle’ in action point 5, with effect from 1 July 2016.

• On 16 November 2017, the UK enacted the legislation incorporated in Finance Bill (No 2) 2017 to amend the patent box regime and ensure that when two or more companies collaborate to undertake research and development under a cost sharing agreement that they are treated fairly. The new legislation takes effect for accounting periods beginning on or after 1 April 2017.

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• The scope of UK WHT on royalties has been changed for payments made on or after 28 June 2016. The new legislation makes changes to the definition of royalties as well as changes to whether a payment has a UK source. Treaty relief will be denied for certain intellectual property royalty (or similar) payments made to connected persons under DTT avoidance arrangements.

• On 1 November 2016, Colombia and the United Kingdom signed a Treaty to Avoid Double Taxation. The treaty includes provisions consistent with the treaty-based recommendations from the BEPS project.

• The MLI opened for signature in December 2016 and the first signing ceremony took place on 7 June 2017. The UK signed the MLI on 7 June 2017, along with 67 other jurisdictions. At the time of signature, each signatory provided a document to the OECD which sets out their Covered Tax Agreements and their reservations and notifications in respect of the MLI.

• Implementation of the anti-abuse provisions is dealt with in article 7 of the MLI where countries must adopt a PPT, a simplified LoB test or negotiate their own detailed LoB provision. The UK position was set out in an open event held by HM Treasury on 12 December 2016 and in the document provided to the OECD at the time of signature. The UK intends to opt for the principal purpose test except where the treaty partner wants to opt out and seek to negotiate a detailed limitation of benefits provision instead.

• The UK Government has published draft legislation that will apply a UK Income Tax charge to amounts received in a low tax jurisdiction in respect of intangible property to the extent the amount relates to the sale of goods or services in the UK. The rules are expected to apply from 6 April 2019. There will be a GBP 10 million de minimis UK sales threshold. On introduction, it will generally apply to entities that are located in jurisdictions with whom the UK does not have a full tax treaty (meaning a Double Tax Agreement which contains a non-discrimination provision).

• In July 2018, the UK entered into new tax treaties with Guernsey, Jersey and the Isle of Man and Cyprus. The treaties are expected to come into force in early 2019. The new agreements are broadly based on the OECD Model Tax Convention and also include the recent BEPS recommendations in relation to the treaties.

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7 PE status

• The Diverted Profits Tax took effect from 1 April 2015 which counters certain arrangements where a foreign entity creates a presence in the UK which falls short of PE status.

• On 1 November 2016, Colombia and the United Kingdom signed a Treaty to Avoid Double Taxation. In relation to Action 7, the Treaty contains an anti-fragmentation rule and a paragraph addressing on the splitting-up of contracts applicable to both the construction PE and the service PE clauses, but it does not contain, nevertheless, the new language on the agency PE clause.

• The MLI opened for signature in December 2016 and the first signing ceremony took place on 7 June 2017. The UK signed the MLI on 7 June 2017, along with 67 other jurisdictions. At the time of signature, each signatory provided a document to the OECD which sets out their Covered Tax Agreements and their reservations and notifications in respect of the MLI.

• The UK position on the permanent establishment provisions within the MLI was set out in an open event held by HM Treasury on 12 December 2016, and in the document provided to the OECD at the time of signing. The UK does not plan to adopt most of the provisions targeting abuse involving PEs, other than the anti-fragmentation rule and the revised definition of closely related persons.

• From 1 January 2019 the government intends to change the definition of PE in UK law. The change will remove access to current PE exemptions in UK law where the business activities have been fragmented.

8 TP - intangibles

• Finance Act 2016 includes legislation which maintains the link between the UK tax legislation and the OECD’s updated TP guidelines.

• On 23 March 2018, the Taxation (International and Other Provisions) Act 2010 TP Guidelines Designation Order 2018 came into effect. The measure updates the definition of ‘the TP guidelines’ within UK legislation to incorporate the updated version of the OECD Guidelines. These rules operate by comparing the actual provision made or imposed as between two persons with the arm’s length provision which would have been made as between independent parties. The order has effect in relation to provisions made or imposed at any time:(a) For corporation tax purposes, for accounting periods beginning on or after 1 April 2018, and (b) For income tax purposes, for the tax year 2018-19 and subsequent tax years.

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• New legislation has been introduced requiring certain UK companies to formally publish their tax strategy. The measure applies if in the previous tax year, the company has turnover above GBP 200 million or a balance sheet over GBP 2 billion. For groups and sub-groups, it’s the combined totals of all the relevant bodies that are considered. The first tax strategy needs to be published by the end of the first financial year after 15 September 2016.

• On 17 October 2016, the UK HM Revenue & Customs (HMRC) released updated guidance on Disclosure of tax avoidance schemes.

• On 5 September 2016 HMRC launched the Worldwide Disclosure facility. This is perceived as the final chance to encourage taxpayers to come forward before the automatic exchange of taxpayer information under the Common Reporting Standard.

• From 30 September 2018, the UK introduced new and stricter sanctions under the Requirement to Correct (RTC). The purpose of the RTC legislation is to require those with undeclared offshore tax liabilities (relating to Income Tax, Capital Gains Tax or Inheritance Tax for the relevant periods) to disclose those to HMRC on or before 30 September 2018.

• The government is expected to publish an updated offshore tax compliance strategy to tackle off shore tax evasion and non-compliance.

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• The UK has implemented CbC reporting regulations to give effect to the recommendations in Action 13. CbCR is mandatory in the UK for accounting periods beginning on or after 1 January 2016 and therefore the first accounting periods impacted by the reporting are for the year ended 31 December 2016.

• An annual notification requirement applies to fiscal reporting on or after 1 January 2016 and needs to be submitted by the end of the reporting fiscal period. The first notifications must be received by the later of the end of the reporting fiscal period or 1 September 2017. The notifications must be emailed to HMRC and include the name and tax reference of the entity which will file the CbC report and the names and tax references for all the MNE group’s entities that are resident in the UK, are UK PEs or are UK partnerships.

• On 15 August 2017, HM Revenue & Customs released guidance on CbC reporting.

• In December 2017, HM Revenue & Customs confirmed that CAAs on the exchange of CbC reports had been signed with Jersey, Guernsey, the Isle of Man and the Cayman Islands. The UK has 58 CbC exchange agreements in place, although not all are effective for reports relating to fiscal periods beginning before 1 January 2017. CbC reports will be shared automatically with tax authorities in the countries named in the report in accordance with international agreements. HMRC has committed to exchange the reports within 15 months of the end of the period covered by the report.

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• On 26 September 2017, the OECD released the UK’s peer review report of the BEPS minimum standards under Action 14 on strengthening the effectiveness and efficiency of the MAP, which is accompanied by a document addressing the implementation of best practices. The report concludes that the UK meets most of the terms of the minimum standard.

• On 31 July 2018, the UK published the 2017/18 statistics on ‘Transfer pricing and diverted profits tax’. This report contains information on the revenue generated by HMRC’s increased focus on TP and the effect of the diverted profits tax (DPT) on the behaviour on multinational enterprises.

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• The MLI opened for signature in December 2016 and the first signing ceremony took place on 7 June 2017. The UK signed the MLI on 7 June 2017 and deposited its instrument of ratification and final list of reservations and notifications on 29 June 2018.

• The MLI entered into force for the UK on 1 October 2018 and will begin to have effect in the UK for UK tax treaties from:

- 1 January 2019 for taxes withheld at source

- 1 April 2019 for Corporation Tax

- 6 April 2019 for Income Tax and Capital Gains Tax

- The date which individual UK tax treaties are modified by the MLI depends on the date our treaty partners deposit their own instruments of ratification, acceptance or approval.

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Country United StatesPKF member firm PKF O’Connor Davies, LLP

Your contact Leo Parmegiani



1 Digital economy • No specific action taken yet, as the US does not follow OECD. n/a

2 Hybrids

• Tax Reform imposes automatic penalties for hybrid debt. Similar to BEPS Action 2, section 267A disallows U.S. tax deductions for related party interest and royalties associated with hybrid entities or hybrid transactions. Section 245A(e) denies DRD for hybrid dividends, and treats any hybrid dividend received by a CFC as subpart F income (with no FTC).

• New related party anti-hybrid provision denies a deduction for any disqualified related party amount paid or accrued pursuant to a hybrid transaction or by, or to, a hybrid entity.

• Disqualified related party amount is generally any interest or royalty payments paid or accrued to a related party to the extent that such amount is not included in the income of such related party under the tax law of its country or the related party is allowed a deduction with respect to such amount under the tax law of its country.

• Hybrid transactions include any one transaction or a series of transactions, agreement or instrument pursuant to which a payment is made that is treated as an interest or royalty of U.S. tax purposes but not under local law of the recipient.

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3 CFCs

• Tax Reform imposes mandatory tax on tax-deferred foreign earnings and Base Erosion and Anti-abuse Tax (BEAT) on certain business expenses to foreign parties.

• Mandatory tax on tax-deferred foreign earnings: Regulations provide for a one-time transitional tax on 10% or more U.S. shareholder’s pro rata share of a foreign corporation’s post-1986 tax- deferred earnings. The tax rate is 15.5% on earnings attributable to cash and cash equivalents and other short-term assets and 8% on remaining assets.

• BEAT: A minimum tax equal to “base erosion minimum tax amount” would be imposed on “base erosion payments” paid or accrued by a taxpayer to a foreign related person. Base erosion minimum tax amount would be the excess of 10% (for tax years beginning before 31 December 2025, and 12.5% thereafter, but 11% and 13.5% for banks and registered securities dealers) of the modified taxable income of the taxpayer for the tax year over the taxpayer’s regular tax liability.

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4 Interest deductions• Tax Reform introduces partial limitation on deduction of “net interest” expense. 30% of EBITDA and 30% of

EBIT as of 1 January 2022

• See Action Point 2.

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5 Harmful tax practices • No specific action taken yet, as the US does not follow OECD. n/a

6 Prevent treaty abuse• On 17 February 2016, the U.S. Treasury Department released a revised Model Treaty which is the baseline

text when it negotiates tax treaties. In the preamble, the 2016 Model Treaty incorporates recommendations of action point 6.

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7 PE status • No specific action taken yet, as the US does not follow OECD. n/a

8 TP - intangibles • No specific action taken yet, as the US does not follow OECD. n/a

9 TP – capital related high-risk transactions • No specific action taken yet, as the US does not follow OECD. n/a

10 TP – other high-risk transactions • No specific action taken yet, as the US does not follow OECD. n/a

11 BEPS data collection • No specific action taken yet, as the US does not follow OECD. n/a

12 Disclosure of aggressive tax planning • No specific action taken yet, as the US does not follow OECD. n/a

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• Final CbC Regulations were issued in June 2016 designed to coordinate with the model CbC reporting template and instructions as per Action Item 13. The CbC information will be reported on new Form 8975 for periods beginning on or after 30 June 2016 and will be required for Ultimate Parent Entities of Multinational Enterprise groups that had on a consolidated basis, revenue of USD 850 million or more in the immediately preceding reporting period. IRS will allow voluntary filings called a “parent surrogate filing” for an earlier period to conform with the OECD start date.

• On 6 April 2017, the US Internal Revenue Service published two model competent authority agreements (CAAs) for the exchange of CbC reports. One CAA is based on the double tax convention and the other arrangement is based on a TIEA.

• In June 2017, the IRS has published 5 CAAs signed by the US and Iceland, the Netherlands, New Zealand Norway and South Africa.

• The US Treasury Department issued revised interpretative guidelines in the first week of November 2017 to assist businesses in preparing required TP documentation.

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14 Dispute resolution • No specific action taken yet, as the US does not follow OECD. n/a

15 Multilateral instrument • No specific action taken yet, as the US does not follow OECD. n/a

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Country Uruguay PKF member firm PKF Uruguay

Your contact Fernando Saltó

Email fsaltó@pkfuruguay.com.uy


1 Digital economy

• Redefinition of the source concept. Services rendered directly from abroad or destined to locals by internet, technological platforms or similar informatic applications, as well as mediation in services rendered in Uruguay when both the supplier and the receiver are in Uruguay are subject to Non-Resident Income Tax

• (IRNR) at the rate of 12%. When services are rendered partially in Uruguay (when only one of them is in Uruguay) tax is calculated on 50% of income.

• When services are rendered locally they are subject to VAT.

Already effective





6 Prevent treaty abuse • MLI signed by Uruguay on 7 June 2017 foresees a simplified LoB provision.• Subject to MLI

effective date to come in force.




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• On 26 October 2018, the Executive Branch issued Decree 2061 which regulates the TP documentation requirements set under the Fiscal Transparency Law (Law No. 19,484 from 5 January 2017);

• CbC report must include the following information:

- Identification of all entities of the Multinational Group, including their place of residence and country of incorporation in case they differ, and the activities that they perform; and

- The group's consolidated gross income differentiating between income derived from transactions with related and independent parties, profits before corporate income taxes, corporate income tax paid and accrued in the relevant tax year, integrated capital, retained earnings, number of employees and tangible assets.

• The Decree details the information regarding the Multinational Group's organizational structure, business, intangibles and the intercompany financial activities, and financial and tax positions, that must be included in the master file. Such required information follows Annex I to Chapter V of the 2017 OECD TP (2017).

• The CbC report and the master file must be filed within 12 months after the last day of the reporting tax year. The Decree is applicable to fiscal years starting from 1 January 2017.

Already in force



• Uruguay is one of the 85 signatories of the MLI. The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

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206



Country VietnamPKF member firm PKF AFC Vietnam Co., Ltd.

Your contact Ha Minh Tu (Andy)





3 CFCs • There are no controlled foreign company provisions in Vietnam. n/a


• There is currently no thin capitalization rule in the tax laws of Vietnam. However, under investment regulations, amounts of debt and equity will be specified in the investment certificate of the Vietnamese company. Therefore, if a Vietnamese company borrows in excess of the amounts indicated in the investment certificate, the tax authorities may deny a tax deduction of the interest of the excess.

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• CbC reporting:

- Applies to MNEs with annual consolidated group revenue equal to or exceeding VND 18,000 billion (approximately EUR 750 million) in the current year. Regulations extend to subsidiary entities.

- Applies for fiscal years ended on or after 1 May 2017.

- Vietnamese entities cannot act as a surrogate and there is no notification requirement.

• The Master File and Local File are the unmodified OECD Action 13 Master/Local File.

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• While Vietnam has become the 100th member of the Inclusive Framework on BEPS, up to now it has not expressed its official position on the MLI. The General Department of Taxation is still in the process of studying the MLI and experience of other countries, as well as reviewing Vietnam’s existing tax treaties in order to come up with a final position.

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Note


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OECD BEPS action plan report - PKF International · 3 OEC BEPS Action Plan Status Update eport OECD BEPS Action Plan Report Status Update December 2018 Background • Taxation is