OECD BEPS recommendations leading to real impact for Thai multinational companies
Thai multinational companies will be impacted on their cross-border business activities due to rapidly evolving tax laws in Europe and Asia Pacific. For example, the European Union (EU) has achieved a groundbreaking result on 20 June 2016 by agreeing a package of tax measures to combat corporate tax avoidance to be introduced by all 28 EU Member States. And the international taxation landscape is expected to become even more complex necessitating careful consideration of financing, international tax structuring, transfer pricing and tax reporting policies worldwide.
The global project to address tax base erosion and profit shifting (BEPS) continues to build momentum, following on from the 2015 final recommendations of the Organisation for Economic Co-operation and Development’s (OECD) Action Plan on BEPS. With the endorsement by the G-20, many countries in the world are in the process of implementing large parts of the BEPS recommendations combating aggressive tax planning structures worldwide.
Since 2015 the European Union (EU) has taken the lead on trying to harmonize EU BEPS implementation for its 28 EU Member States. On 20 June 2016 this has resulted in a political agreement between all EU Member States on the proposal for an anti-tax avoidance directive (ATAD). The EU ATAD lays down common minimum corporate tax rules in the areas of interest limitation, exit taxation, general anti-abuse rules (GAAR), controlled foreign companies (CFC) and hybrid mismatches. EU Member States are now obliged to implement the EU ATAD in their national legislation to be effective from 1 January 2019. The release of the so-called ‘Panama Papers’ and the continuing focus of the public and tax policy makers has certainly created even more momentum for wide EU support for adopting BEPS measures. The ATAD comes on top of already agreed EU rules on exchange of tax rulings, transfer pricing documentation and exchange of country-by-country tax reporting.
Thai multinationals with operations in European countries will all have to consider the implications of the new tax rules on their financing and interest payments, international tax structuring and holding companies, transfer pricing and reporting policies in the EU. The BREXIT referendum held on 23 June 2016 in the United Kingdom where the public has voted in favour of leaving the European Union will most certainly complicate these considerations.
Moreover, also the tax administrations in the Asia Pacific region feel a sense of urgency to advance efforts in the fight against tax avoidance and aggressive tax planning, where Australia, China, Japan and India have taken the lead on implementation of BEPS recommendations. The OECD has tried from the start of the BEPS process in 2013 to engage with non-participating countries, including the ASEAN Member States, in order to reach a truly global platform for BEPS implementation. Currently only Indonesia has politically committed to implementing BEPS as a G-20 Member State. Thailand, Singapore, Malaysia and Vietnam follow the process with great interest and are in the process to introduce parts of the BEPS recommendations (for example on transfer pricing, exchange of information and country by country reporting). During the KPMG ASPAC Summit, held in May 2016 in Beijing, tax directors and government tax officials representing various countries in the region all shared the same view.
Also the ASEAN Economic Community (AEC) Blueprint 2025 mentions the commitment to ‘discuss measures to address the issue of base erosion and profit shifting to ensure fiscal health’. With the inclusion of the BEPS paragraph in the AEC Blueprint 2025, the ASEAN tax administrations are opening a door towards a certain framework for discussing potential detrimental effects of tax competition within the region.
All these developments leave Thai multinational companies exposed to profound international taxation changes in almost all countries in the world where Thai companies have created significant business presence in the past decade.
KPMG in Thailand won two awards from 2016 International Tax Review Awards: National Tax Firm and Tax Disputes & Litigation Firm
KPMG was also recognized as the Asia Tax Firm , Asia International Tax Firm, Asia Indirect Tax Firm and Asia Global Executive Mobility Firm
© 2018 KPMG Phoomchai Tax Ltd., a Thailand limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.