OECD BEPS Action Plan - Country Responses to the OECD BEPS Recommendations

OECD BEPS Action Plan - Appendix

The OECD BEPS Action Plan Final Reports were only published on 5 October 2015, and many countries have changed or plan to change their tax legislation or administration in response.

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appendix

Below, we summarize actions taken so far by European countries in response to the 15 points of the OECD's BEPS Action Plan. Note that this information was the most current update available at the time of the release of the publications in our Taking the Pulse series. While we aim to update this page regularly, for the most up-to-date developments on BEPS generally, please refer to our BEPS TaxNewsFlash page. For the most up-to-date responses to Action 13 specifically, please visit the Action 13 country implementation summary page, which is updated weekly.

Action 1 - Address tax challenges of the digital economy

  • Bulgaria — New place-of-supply rules for business-to-consumer supplies of telecommunication, broadcasting and electronically supplied services; introduction of simplified registration regime.
  • Chile — Tax reforms adopted in 2014 empowered the Chilean Internal Revenue Service (IRS) to require taxpayers to report information about electronic gambling activities, digital commerce in any form, online applications and digital services. The Chilean IRS also instituted a Special Audit Unit to analyze technological systems.
  • Finland — The Finnish Tax Administration is running a project to address tax questions related to electronic commerce.
  • France — Greater scrutiny of digital companies; new requirements for segmented accounts. Tax searches have significantly increased in the last months, with the French tax authorities searching the mailboxes and documents of IT companies to see if there is a PE issue.
  • Greece — The VAT Directive regulating the treatment of digital services provided to customershas been domestically implemented since 2015; new regulations on taxation of onlinegambling games were introduced, taking effect 1 January 2016.
  • India — Union Budget 2016–17 proposed to introduce an equalization levy of 6 percent on online advertisement services rendered by non-resident companies that have no permanent establishment in India, with corresponding ‘treaty override’. Likely to raisedisputes and may be redrafted before enactment. Effective date to be notified.
  • Ireland — Changes in VAT place-of-supply measures for digital supplies and related mini one-stop-shop requirements have been implemented.
  • Italy — New rules to tax online transactions pending in Parliament, including new PE definition (which introduces ‘virtual PE’ concept) and withholding tax on digital goods and services supplied by non-residents.
  • Japan — Consumption tax for cross-border digital services introduced from October 2015.
  • New Zealand Non-resident suppliers of digital content (i.e. software, media) and services to New Zealand consumers will need to register for and pay goods and services tax from 1 October 2016.
  • Portugal  New legal framework for online gambling and betting.
  • Romania — New regulations on authorization and taxation of online gambling.
  • Russia — New VAT regulation for electronically supplied services.
  • Taiwan — Ongoing study of corporate income tax and valued added tax in the context of the digital economy.
  • USA — The Obama Administration has proposed a rule to currently tax foreign transactions involving digital goods or services.

Action 2 – Neutralize effects of hybrid mismatch arrangements

  • Australia — No immediate changes. The Board of Taxation will deliver a report to the Australian government in 2016 on whether to implement anti-hybrid rules. Any anti-hybrid laws resulting from this report are not expected to take effect until 2018.
  • Bulgaria — Anti-hybrid provisions aimed at eliminating possibilities for double non taxation introducedin 2016. Income from inbound dividends is not exempt from corporate income tax, whenthe distributed amounts are tax-deductible expenses and/or decrease the taxable resultof the distributing entity regardless of their accounting treatment at the level of thedistributing entity.
  • Chile  Although no specific anti-hybrid rules have been introduced, a general antiavoidance rule that can be used to challenge structures or transactions involving hybrid mismatches took effect in October 2015.
  • China — The SAT has informally indicated that anti-hybrid mismatch rules will be introduced in 2016.
  • Cyprus – Anti-hybrid provisions enacted for inbound dividends, denying equity treatement if a foreign-sourced dividend is deducted by the paying affiliate. 
  • Czech Republic — Czech Income Tax Act amended in 2016 to include limitation of tax exemption for so-calledhybrid loans, but, due to an inappropriate EU Directive implementation, the limitationcurrently applies only to dividends received from subsidiaries located outside the EU; thisshould be changed as of 1 January 2017.
  • Estonia — New legislation on corporate dividends, in effect as of November 2016, allows taxexemption on dividends received from a foreign entity only if the foreign entity has not had the right to deduct the dividend from its taxable income (e.g. as interest).
  • Finland – Anti-hybrid rule implemented in accordance with the amended Parent-Subsidiary Directive, effective 1 January 2016.
  • France – Existing rules limit opportunities for hybrid instruments, including rules aimed atdisallowing (i) participation exemption, if the amount of dividend has been deducted bythe subsidiary; and (ii) deductibility of interest, if the amount is not subject to a minimumtaxation at the foreign lender’s level.
  • Germany – Anti-hybrid rules in place (correspondence principle for dividends).
  • Hungary – A new anti-hybrid rule with effect from 2015 declares as a principle that any differences between the legal classification of legal relations that are affected by international treaties cannot result in double non-taxation; if they do, Hungary will includethe relevant income in the taxable base.
  • Ireland – Existing provisions limit opportunity for hybrid structures.
  • Italy – Anti-hybrid provisions already exist with respect to inbound dividends, denying equity treatment if a foreign-sourced dividend is deducted by the paying affiliate; Italy lacks a provision on hybrid entities. 
  • Japan — Foreign dividend exemption rule amended to comply with Action 2 as part of the 2015 tax reform.
  • Lithuania — General anti-avoidance provisions based on the amended EU Parent-Subsidiary Directive were implemented as of March 2016 for inbound and outbound dividends.
  • Luxembourg – Domestic law was amended to include an anti-hybrid rule in line with the EU Parent-Subsidiary Directive as of 2016.
  • Malta – Guidelines issued emphasizing that Maltese participation exemption does not apply to hybrid instruments in case of underlying debt; participation exemption system amended in line with EU Parent-Subsidiary Directive.
  • Mexico — Anti-hybrid and double deduction provisions have been introduced that limit deductions for interest, royalty and technical assistance payments that are not subject totax in the recipient country.
  • New Zealand — Some anti-hybrid measures are already in place (e.g. deductible foreign dividends are taxable; certain hybrid financial instruments are re-characterized as equity). A consultation document on Action 2 is expected to be issued in the second half of 2016.
  • Norway – Under changes to the exemption system, as of 1 January 2016, Norwegian shareholders are denied tax exemption where the foreign distributing company is entitled to a deduction for the distribution, typically because the payment is classified as interest in the distributor’s jurisdiction.
  • Poland – Rules on corporate dividends, introduced as of 2015, disallow participation exemption if the amount of dividend has been included in tax-deductible costs of an entity paying the dividend.
  • Portugal – Rules regarding dividends from foreign entities revised under 2014 reform.
  • Romania – Treaty benefits are denied for 'artificial cross-border transactions'; adjusted legislation to reflect the new provisions of the Parent-Subsidiary Directive.
  • Slovakia — Received dividends are generally not taxable, but if tax deductible in the paying country, they become taxable in Slovakia. Dividends may become taxable if they are received as a result of artificial arrangements.
  • Spain – Anti-hybrid legislation in force as of 1 January 2015
  • Sweden — Introducing anti-hybrid rules in line with the latest amendments to the Parent–Subsidiary Directive
  • Switzerland – Current tax rules (introduced about 2 decades ago) do not allow Swiss parent companies to use hybrid structures with their immediate subsidiaries.
  • Taiwan — The OECD recommendations are being implemented in treaty negotiations.
  • United Kingdom – Draft legislation has been published, and the new rules will apply to payments made on or after 1 January 2017.
  • USA — The Obama Administration has proposed a rule that would deny deductions for related-party interest and royalty payments in certain situations involving hybrid arrangements and to currently tax some payments received by US-owned foreign reverse hybrid entities.

Action 3 – Strengthen CFC rules

  • Brazil — Brazil already has one of the world’s most stringent CFC regimes, and these rules further strengthened in 2014.
  • Chile — CFC legislation was introduced in 2014 and applies from 2016 onward. The new rules generally meet the strengthened standards recommended by the OECD.
  • China — China’s BEPS-aligned controlled foreign company rule will be clarified via a circular on special tax adjustments expected to be finalized in 2016.
  • Costa Rica — Proposed legislation would tax extraterritorial passive income on repatriation.
  • Czech Republic — No CFC legislation currently; CFC legislation is expected to be implemented as of 1 January 2019 as a result of the ATA Directive.
  • Finland – The Audit Committee is running a project to develop means to prevent international tax avoidance overall; whether this will affect the Finnish CFC legislation is unknown.
  • France – CFC legislation in force.
  • Germany – CFC legislation in force, some adjustments expected due to the EU ATA Directive.
  • Greece – CFC rules apply from 2014 onwards.
  • Hungary – CFC legislation in force.
  • Iceland – CFC legislation introduced in 2010.I
  • India — Controlled foreign company rules were introduced indirectly by incorporating the concept of ‘passive income’ for determining place of effective management (POEM), for purposes of tax residency of foreign companies in India, with effect from FY2016–17. The Indian Revenue Board issued draft POEM guidelines in December 2015. Final guidelines are not yet released.
  • Ireland — No CFC legislation currently; CFC rules are expected to be introduced by 1 January 2019 in line with the EU ATA Directive.
  • Italy – Existing rules were amended twice in 2015, and seem substantially compliant with Action 3. 
  • Korea — Introduced controlled foreign company rules on passive income.
  • Poland – CFC rules introduced as of 2015.
  • Portugal – CFC rules in force.
  • Romania — Introduction of CFC rules currently considered.
  • Russia – CFC rules further developed in 2016; blacklist of tax haven jurisdictions published.
  • Spain – CFC rules recently strengthened.
  • Sweden – CFC legislation in force.
  • Taiwan — Previously proposed controlled foreign company rules are being revisited.
  • Thailand — Introduction of controlled foreign company rules under consideration.
  • Turkey – CFC legislation introduced in 2006 and currently in force.
  • United Kingdom – CFC rules in force; new rules were introduced in 2013, and no further substantive changes are expected.
  • United States — An Obama Administration proposal would impose a 19 percent minimum tax on certain foreign income of CFCs.

 

Action 4 – Limit base erosion via interest deductions and other financial payments

  • Austria – Restrictions on deductions introduced.
  • Australia — The Australian thin capitalization thresholds were tightened from a 75 percent gearing ratio to a 60 percent gearing ratio for income years beginning on or after 1 July 2014.
  • Belgium – Thin capitalization rules strengthened.
  • Brazil — Brazil already has thin capitalization rules, transfer pricing rules, deduction restrictions to payments to tax havens and other measures to fight base erosion via interest deductions and other financial payments.
  • Chile — Thin capitalization rules were enhanced as of 2015. Stricter provisions for interest deductibility are in force from 2014, along with deductibility requirements for related-party payments.
  • Costa Rica — Proposed legislation sets out 2:1 thin capitalization rules. Withholding tax exemptions for foreign lenders have been virtually eliminated.
  • Czech Republic – General debt-to-equity thin capitalizatoin rules are in place; EBITDA-based interest deductibility limitation is expected to be implemented as a result of the ATA Directive.
  • Finland – Limits on deductibility of interest apply from 2014; the limitation might be expanded to apply also to non-related party interests.
  • France – Thin capitalization rules strengthened; interest deductibility limited where beneficiary is subject to low taxation.
  • Greece – Stricter provisions for deductibility as of 2014, including thin capitalization rules and rules denying deductibility of expenses paid to tax residents in non-cooperative state(s) and state(s) with a preferential tax regime unless the taxpayer proves that such expenses concern real and ordinary transactions.
  • Hungary – As of 2012, a more restrictive dividend definition was introduced to domestic law to tackle deduction/non-inclusion; under the rule, dividend income is tax-deductible only if the payer did not deduct it from its pre-tax profit.
  • Iceland – A bill in relation to thin capitalization is with Congress but not yet approved.
  • Italy – Existing restrictions on interest deduction (i.e. up to 30 percent of EBITDA) seem compliant with Action 4.
  • Malta – Plans to implement the provisions of the EU ATA Directive to take effect as of 2019, except for the interest dedcution limitation, which will take effect 1 January 2024.
  • Japan — Introduction of an earnings-stripping regime to prevent companies from taking excess interest deduction in 2012 (not directly linked to BEPS).
  • Malaysia — Introduction of thin capitalization rules as of 1 January 2018.
  • Mexico — Deductions for interest, royalty and technical assistance payments are disallowed where the payments are not subject to tax in the recipient country.
  • New Zealand — Legislation is expected in 2016 to strengthen and broaden existing withholding tax rules (i.e. to apply withholding tax in more circumstances and to payments meeting a wider definition of ‘interest’). Consultation on interest deductibility is expected in the second half of 2016.
  • Norway – Further tightening of the rules limiting interest deductibility and introduction of withholding tax on interest and royalties are currently under review by the Ministry of Finance. The outcome is expected to be presented this fall. As of 1 January 2016, deduction of intra-group interest is limited to 25 percent of tax EBITDA.
  • Panama — Financing among related parties is subject to transfer pricing regulations.  Moreover, back-to-back loans are permitted but interest deduction is limited to the spread.
  • Poland – More restrictive thin capitalization regime introduced as of 2015 (equity-based alternative method available).
  • Portugal – Earnings stripping rules introduced in 2013, limiting interest deductibility, tightened under 2014 reform; increased scrutiny of transfer pricing practices.
  • Romania – Tightening thin capitalization rules.
  • Russia – Extended, more sophisticated thin-capitalization rules introduced; adoption of fixed ranges for interest deductibility purposes that prevail over transfer pricing rules.
  • Slovakia – Earnings-stripping rules implemented with effect from 1 January 2015 effectively limit interest deduction on related-party loans
  • Spain – Stricter interest deductions rules in force as of 1 January 2015.
  • Sweden – Strict interest deduction rules introduced in 2013 deny deduction of intragroup interest cost (with exceptions); the Swedish Tax Agency is scrutinizing intra-group restructurings and stepping up audit activity in this area; existing rules potentially contrary to EU law (pending EC infringement procedure).
  • Taiwan — Introduced thin capitalization rules in 2011 (not directly linked to BEPS).
  • Thailand — Introduction of thin capitalization rules under consideration.
  • Vietnam — Introduction of thin capitalization rules under consideration.
  • United Kingdom – New BEPS-compliant rules for interest are being drafted and will be implemented for payments made on or after 1 April 2017.
  • United States — The Obama Administration has proposed a rule to limit the deductibility of interest expense based on the ratio of the leverage of a multinational group’s US operations to that of its worldwide operations.

Action 5 – Counter harmful tax practices more effectively, taking into account transparency and substance

  • Australia  Multinational anti-avoidance law (de facto diverted profits tax) legislated with effect for income years beginning on or after 1 January 2016.
  • Bulgaria – New rules introduced in 2016 on the automatic exchange of financial information between states and the economic and financial relations with companies registered in preferential tax treatment jurisdictions. The Convention on Mutual Administrative Assistance in Tax Matters and the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information entered into force for Bulgaria as of 1 July 2016.
  • Canada  Canada has joined the Multilateral Competent Authority Agreement, which implements the Standard for Automatic Exchange of Financial Information in Tax Matters.
  • Chile — General anti-avoidance rules (based on the substance-over-form principle) entered into force in 2015, and the definition of ‘preferential tax regime’ has been broadened.
  • China — The tax incentive for high and new technology was modified to allay concerns raised by other countries during the BEPS process.
  • Cyprus – IP regime to be modified to take into account the OECD recommendations (i.e. in line with modified nexus approach).
  • Czech Republic – No preferential IP regimes (i.e. patent box) in place.
  • Estonia – New anti-abuse rules introduced concerning foreign-dividend taxation, taking effect as of November 2016.
  • Finland – The Council of State has expressed support for implementing automatic exchange of information on cross-border tax rulings and has submitted its letter to the Parliament.
  • France – Substance under scrutiny. The French preferential IP regime (reduced CIT rate of 15 percent on income deriving from certain IP assets) has been considered as inconsistent with the OECD's modified nexus approach. Some modifications may be made to the French tax law to comply with OECD's BEPS recommendations.
  • Greece – Special and general anti-avoidance rules introduced in 2014 incorporate the general substance-over-form principle. 
  • Hong Kong — Introduced measures to enact a Corporate Treasury Centre regime; Action 5 specifically referenced during the legislative process.
  • Hungary – In 2016, significant amendments to the Hungarian patent box regime were introduced, which entered into force as of 1 July 2016. These amendments have adapted the domestic regulation in line with the modified nexus approach endorsed by the OECD and the EU. Parallel transitional and grandfathering rules also entered into force.
  • Iceland – A general anti-avoidance bill includes burdensome disclosure requirements for tax advisers in relation to CFC country advice. The bill has not yet been passed.
  • India — Union Budget 2016–17 proposed to introduce a patent box regime, offering a 10 percent tax rate for royalties earned from licensing patents developed and registered in India.
  • Ireland – Patent box (i.e. ‘Knowledge Development Box’ — KDB) provides a 6.25 percent tax rate on qualifying income as of 1 January 2016 and is compliant with the OECD’s modified nexus approach. Detailed revenue guidance was released in July 2016. Guidelines have also been released for implementation of exchange of tax ruling information under both OECD requirements as of 1 April 2016 and the EU DAC as of 1 January 2017.
  • Italy – Anti-avoidance provision replaced with a new definition of ‘abuse of law’ and unified concepts of ‘abuse of law’ and ‘tax avoidance’. Restrictions to deduct costs from tax havens repealed since 2016. The Italian Patent Box regime, introduced in 2015, is substantially compliant with the modified nexus approach. The application of the benefit to trademarks and know-how is not compliant with the OECD recommendations and should be repealed soon.
  • Korea — A substance-over-form rule allows the tax authority to re-characterize a related party transaction based on its substance where the tax burden of a company has beenunjustly reduced.
  • Luxembourg – Old IP regime repealed with transition period until 2021. Ongoing work on a new IP regime taking into account the OECD work (i.e. in line with the modified nexus approach).Bill transposing DAC 3 (for the exchange of cross-border rulings and APAs as of 1 January 2017) was voted mid-July 2016.
  • Malta – GAARs under domestic law deny tax benefits where a transaction's purpose is to avoid Maltese taxes.
  • New Zealand — New Zealand has committed to implementing automatic exchange of (financial account) information from 1 July 2017 and will start automatically exchanging unilateral tax rulings with treaty-partner countries in 2016.
  • Norway – Official committee recommended incorporating current administrative anti-abuse rules,with some changes, into Norwegian tax law. In March 2016, the Ministry of Finance started consultations on the incorporation of an anti-abuse rule in the tax legislation. The outcome is expected to be presented this fall.
  • Panama - Regulations were enacted in 2015 to develop the concept of substance upon the request of tax residence certificates.
  • Poland – Introduction of a specific anti-avoidance clause to the Polish participation exemptiontaking effect 1 January 2016, GAARs will be introduced 15 July 2016; plans to introduce aspecific anti-avoidance clause as of 2017 in the share-for-share exemption provisions.
  • Portugal – IP regime to be modified to take into account the OECD work (modified nexus approach). Increased scrutiny of transfer pricing practices.
  • Romania – Under general anti-abuse provisions (substance-over-form principle), transactions can be disregarded or adjusted for tax purposes. 
  • Russia – Signed Mutual Competent Authority Agreement in 2016 and committed to undertake first automatic exchange of information starting as of 2018; introduced law on obligatory disclosure of ultimate beneficial owners by companies; substance-over-form approach confirmed by various clarifications of the tax authorities and the courts.
  • Slovakia – Substance-over-form principle broadened.
  • Spain – Substance-over-form approach strengthened (through modifications to the GAARs in the General Tax Law). New regulation adapting the Spanish patent box regime to the OECD's modified nexus approach applies as of 1 July 2016.
  • Turkey – Substance-over-form principle is already a general principle arising from the Tax ProcedureLaw. Tax inspectors sometimes stretch the principle to support their views. Turkey signed the Convention and protocol on Mutual Administrative Assistance in Tax Matters on3 November 2011. It is still being approved and ratified, and it is expected to be in effect forfirst automatic exchange of information in 2018. Turkey’s intergovernmental agreement (IGA Model I) with the United States has been approved and ratified by the Turkish Parliament.
  • United Kingdom – A new patent box regime is expected to come into force as of 1 July 2016, operating in parallel with the current patent box regime, which is to be grandfathered until June 2021.
  • United States — There is a legislative proposal for a regime that would provide incentives for intangible property.

Action 6 – Prevent treaty abuse

  • Australia — BEPS treaty anti-abuse rules are included in the new Australia-Germany treaty (signed in November 2015).
  • Brazil — Limitation on benefits provisions are included in the most recent tax treaties executed by Brazil.
  • Bulgaria – Some tax treaties are being renegotiated to include explicit limitation on benefits clauses.
  • Chile — Administrative instructions define the scope of ‘beneficial owner’. New tax treaties under negotiation include explicit limitation on benefit clauses, anti-treaty shopping clauses and a principal purpose test.
  • China — BEPS treaty anti-abuse rules are included in the new Chile-China treaty (signed May 2015). Treaty relief administration procedures in China were reformed in November2015 to facilitate application of new treaty anti-abuse approaches.
  • Costa Rica — The government has been reluctant to negotiate new treaties. The country has only one treaty in effect, while two others have been submitted for legislative approval.
  • Czech Republic — Beneficial ownership requirement must be met for tax treaty purposes; general abuse-of-law principle applies for tax matters including tax treaty applications.
  • Finland – The Finnish Tax Administration is running a project that aims to promote Finland’s international cooperation.
  • France – Anti-treaty shopping clause in new tax treaties.
  • Germany – New German model tax treaty contains switch-over and subject-to-tax rules as well as specific anti-avoidance rules.
  • Hungary – A new GAAR aims to deny tax exemption on income not taxable in any of the countries under a tax treaty due to different interpretation of the facts and/or the treaty itself, allowing the tax authority to bypass the normal mutual agreement procedure in such cases and proceed directly to deny the exemption.
  • India — Introduced or expanded limitation on benefits concept in recent tax treaties.
  • Ireland — Awaiting release of multilateral instrument measures.
  • Italy – Existing rules to be reviewed.
  • Japan — Some tax treaties include limitation on benefits clauses.
  • Korea — In recent treaty negotiations, Korea has worked to introduce limitation on benefits clauses.
  • Luxembourg — First new treaty including some of the BEPS Action 6 recommendations was signed with Senegal in February 2016.
  • Mongolia — Cancellation of certain treaties due to abuse.
  • New Zealand — Newer tax treaties contain limitations on benefits provisions, but none to date explicitly follow the OECD recommendations. New Zealand’s treaty with Australiamay be a test case as it is due for review by both countries. New Zealand will be involved in OECD multilateral instrument discussions and negotiations.
  • Panama — A new regulation has been adopted regarding the proper application of treaty benefits.
  • Papua New Guinea — New treaty negotiations are suspended; the government willwait to see what actions other countries are taking on treaties before re-commencingnegotiations.
  • Poland – Reviewing and amending tax treaties, with plans to introduce a definition of 'Polish-source income' as of 2017.
  • Romania – Increased withholding tax of 50 percent for payments to companies resident in non-treaty countries in relation to artificial transactions; renewing existing treaties to add information exchange and administrative cooperation clauses.
  • Russia – Introduced beneficial ownership concept in tax law; enhanced tax audits on improper use of tax treaties are currently in place; significant amount of new court practice has emerged inthis area.
  • Slovakia – Whitelist of treaty states established; withholding and security taxes significantly increased on payments to non-treaty countries; payments to non-treaty countries deductible only after the required withholding, settlement and notification to tax authorities are complete.
  • Sweden – The Swedish government has been increasing the number of Swedish tax treaties in the past few years and is seeking to include tax information exchange clauses.
  • Switzerland – For over 50 years, Switzerland has had legislation in place to unilaterally inhibit the misuse of treaty benefits.
  • Taiwan — The OECD recommendations are under study and being considered in current treaty negotiations.
  • Turkey – Renewing existing treaties to add information exchange and administrative cooperation clauses.
  • United States — The Obama Administration has proposed revisions to the US model treaty that include, among other things, draft provisions addressing issues arising from ‘special tax regimes’.

Action 7 – Prevent artificial avoidance of permanent establishment status

  • Canada Since 2013, Canada has been evaluating measures to combat treaty shopping
  • Chile — No legislation to date. However, the ‘permanent establishment’ definition in Chile’s tax treaties is typically broader than the OECD model definition and the exception for preparatory and auxiliary activities is narrower.
  • China — Among various measures, BEPS permanent establishment concepts are included in the new Chile-China treaty (signed May 2015); new permanent establishment recognition/profit attribution guidance is anticipated in the second half of 2016: and the SAT has clarified that some aspects of BEPS permanent establishment concepts may be applied by Chinese tax authorities under existing guidance on permanent establishment recognition.
  • Czech Republic — No changes to the PE concept are expected in the near future.
  • Estonia – New regulations expected ahead of OECD.
  • France – New PE definition to be introduced in tax treaties.
  • Greece – Existing PE laws remain strict.
  • Italy – New provisions were introduced in 2016 on the attribution of profits to Italian PEs anda regulation on the determination of free capital of PEs in the banking industry recallsthe OECD BEPS principles on the attribution of profits to PEs. More implementationof regulations is expected soon. The PE definition, as interpreted by case law and taxauthorities, substantially complies with BEPS Action 7.
  • New Zealand — To date, no New Zealand tax treaties explicitly follow the OECD recommendations. New Zealand’s treaty with Australia may be a test case as it is due for review by both countries. New Zealand will be involved in OECD multilateral instrumentdiscussions and negotiations.
  • Poland – Intention to put more emphasis on tax audits of entities doing business in Poland through unregistered PEs.
  • Portugal – Increased scrutiny of transfer pricing practices.
  • Spain – In practice, Spain’s tax authority already broadens the definition of PE and applies a more economic concept.
  • Sweden – New registration rules for foreign employees present in Sweden have increased the Swedish Tax Agency’s interest in determining whether these employees' activities trigger PE status for their employer.
  • Taiwan — The OECD recommendations are under study and being considered in current treaty negotiations.
  • Turkey – More audit scrutiny is being devoted to PE issues.
  • United Kingdom – New ‘Diverted Profits Tax’ (at a rate of 25 percent, rather than the current 20 percent for corporation tax) introduced from 1 April 2015 to counter perceived contrived arrangements to divert profits from the UK.
  • Vietnam — The domestic ‘permanent establishment’ definition is more aggressive than the OECD BEPS proposed policy.

Actions 8, 9, 10 – Ensure transfer pricing outcomes are in line with value creation

Action 8 – intangibles, Action 9 – risks and capital, Action 10 – other high-risk transactions

  • Australia — Multinational anti-avoidance law (de facto diverted profits tax) legislated with effect for income years beginning on or after 1 January 2016.
  • Austria   Increased tax audits and greater scrutiny of transfer prices. 
  • Belgium — More scrutiny of transfer prices.
  • Canada — KPMG in Canada has seen cases in which the Canada Revenue Agency has applied the OECD’s recommended principles in transfer pricing audits.
  • Chile — Transfer pricing is under more scrutiny, and the scope of Chile’s business restructuring rule has been broadened.
  • China — BEPS transfer pricing guidance will be substantially incorporated into Chinese transfer pricing guidance (with significant ‘localization’) via a circular on special tax adjustments to be finalized in 2016.
  • Czech Republic —  Follows OECD transfer pricing guidelines, which are indirectly implemented into Czech tax lawby the arm’s length provision and by reference to Guideline D-334. The BEPS amendments partially incorporated into the OECD transfer pricing guidelines will be applicable in the Czech Republic also. Since 2015, together with their tax return, taxpayers also need to file a special transfer pricing disclosure with basic information about related-party transactions (e.g.transaction type, magnitude and country — separately for each related party). Substance,functions and risks allocation are now closely scrutinized in tax audits.
  • Finland – Although the revised transfer pricing guidelines have not been directly implemented in Finland, the OECD transfer pricing guidelines are generally regarded as soft law and followed in practice.
  • France — Increased tax audits and greater scrutiny of transfer prices.
  • Greece — Greater scrutiny of transfer prices.
  • Iceland   Transfer pricing regulations introduced with effect from 1 January 2014.
  • India — The Indian revenue authority deviates from the OECD’s position on location savings. India views such savings as an intangible that would result in extra profit and thusshould be attributed on related-party transactions. When planning for the cross-charge for services that involve intangibles, international companies need to ensure that transferpricing outcomes are in line with value creation.
  • Ireland — In the past, Ireland has formally adopted OECD guidelines as its domestic transfer pricing guidance. Ireland is expected to review the updated OECD guidelines and formally adopt them as the basis for future Irish transfer pricing guidance.
  • Italy   Amendments to the OECD guidelines in light of BEPS Actions 8 — 10 should not require implementation, as Italian tax law directly refers to the OECD guidelines. Transfer pricing documentation disclosure allows taxpayers to be released from any assessed penalties.A 2015 decree on growth and internationalization clarifies that the arm’s length standard does not apply to domestic transactions. According to the new decree, no criminal penalties should apply in cases of transfer pricing adjustments.
  • Lithuania – Increase in transfer pricing audits, with special focus on related-party loans, management services and royalties.
  • Luxembourg – More detailed transfer pricing rules are contemplated.
  • Malaysia — Transfer pricing guidelines in place. Malaysia tends to adopt OECD guidelineswhen finalized. Additional measures were introduced in 2015 to tighten transfer pricingcompliance.
  • Mexico — A new transfer pricing group has been formed with the tax authority in order to increase scrutiny of transfer prices.
  • New Zealand — No unilateral action to date. New Zealand will be involved in OECD Working Party work on transfer pricing recommendations.
  • Peru — Tax audits addressing application of arm’s length principle are increasing. Peru’s tax laws expressly regard the OECD’s transfer pricing guidelines as an authoritative source of interpretation.
  • Poland —  Increased tax audits and greater scrutiny of transfer prices.
  • Portugal — Increased scrutiny of transfer pricing practices.
  • Romania – Increased scrutiny of transfer prices and tightening of transfer pricing reporting requirements. 
  • Russia — Russia is not a member of OECD, but the Russian tax authorities are aware of BEPSrecommendations and can apply them in practice. In particular, during audits, the Russian taxauthorities are scrutinizing transfer pricing for commodities, intra-group services and royalties.
  • Singapore — In early 2015, the Inland Revenue Authority of Singapore adopted many ofthe BEPS Action Plan items relating to transfer pricing.
  • Slovakia – Rules amended to broaden scope of transfer pricing rules to also cover domestic transactions.
  • Spain – The Spanish Tax Administration follows the OECD approach in this respect.
  • Sweden — The Swedish Tax Agency has declared that it considers the BEPS report Aligning Transferpricing Outcomes with Value Creation a mere clarification of the arm’s length principle.Therefore, the Agency holds the position that the guidance in the report shall have both direct and retroactive effect on the interpretation of the arm’s length principle in Sweden.
  • Sri Lanka — Measures implemented to enforce transfer pricing as of the 2015/16 fiscal year.
  • Taiwan — Transfer pricing assessment rules are expected to be updated in 2016.
  • Thailand — Transfer pricing rules are expected to be enacted late 2016.
  • Turkey — Increased transfer pricing audits. The Turkish Revenue Administration also covered certainitems of Actions 8, 9 and 10, such as location savings, local market features, multinationalentity group synergies and transfer of IP under the title ‘comparability factors’, and costcontribution arrangements in a draft communiqué published in March 2016.
  • Vietnam — Revisions to the transfer pricing regulations, potentially in line with BEPS, are being considered. The timeline for such regulatory changes is unclear.
  • The Netherlands —  New transfer pricing decree introduced.
  • United Kingdom — Adopted the revised OECD guidelines as of April 2016.

Action 11 – Establish methodologies to collect and analyze data on BEPS and the actions to address it

  • Australia Recently passed laws to improve the transparency of the Australian corporate tax system require the Australian Taxation Office to publish tax-related information of large corporate taxpayers, with effect from the 2013–2014 income year.Information disclosed includes name and Australian business number of the entity; total income and taxable income for the income year; and income tax payable for the income year after applying available tax offsets.
  • Chile — New rules require large corporate taxpayers to file an annual information return on the ‘global tax characterization’ of their operations, with the first returns due in 2016 for calendar year 2015.
  • Costa Rica — The Tax Code has been modified to give the tax administration more powers to collect data.
  • Finland — The Council of State set up a working group in January 2016 to assess the economic effects of BEPS actions and related EU initiatives in Finland.

Action 12 – Require taxpayers to disclose their aggressive tax planning arrangements

  • Belgium – Mandatory disclosure of tax haven payments.
  • Bulgaria — Mandatory disclosure of information about related-party transactions and transactions with low-tax jurisdiction entities together with the submission of the corporate income tax return.
  • Brazil — No action to date. A proposal to require taxpayers to formally report to the Brazilian tax authorities transactions that result in a tax benefit proved highly controversial, and it did not pass before the Brazilian Congress
  • Chile — A voluntary disclosure mechanism allows for a determination that a particular tax plan is not abusive under Chile’s new GAAR provisions. Corporate taxpayers will be required to inform the Chilean IRS, through a sworn statement of the amounts, types and the destination of the investments performed abroad and in Chile.
  • Czech Republic — No rules currently. As an EU member state, the Czech Republic would implement such rules if required by an EU directive within the required timeline.
  • France — List of aggressive tax strategies published by the French tax authorities.
  • Germany – Disclosure rule for aggressive tax planning structures under discussion but not yet proposed.
  • Ireland — Already has mandatory disclosure of tax planning wiht defined hallmarks.
  • Mexico — Taxpayers are obliged to file a ‘Relevant Transactions’ information return to report information about tax planning that the tax authorities might consider aggressive.
  • Poland — Extended reporting requirements under transfer pricing and CFC regulations.
  • Portugal — Disclosure provisions introduced in 2008 and subsequently refined.
  • Russia – CFC rules oblige Russian taxpayers to disclose participation in foreign companies(including trusts, funds and foundations). Foreign companies that hold Russian-situsimmovable property must submit data about their chain of owners (up to 5 percent ofindirect ownership).
  • Sweden — The Swedish government has announced its intentions to investigate reportingobligations for tax advisors. Currently, the government is preparing instructions to aworking group, that will investigate such legislation.
  • Turkey – Companies registered with the Large Corporation Tax Office are required to prepare transfer pricing reports by April of fiscal year following end of the preceding calendar year and submit them upon request. A 30 percent withholding tax in the Corporate Tax Law applies to payments to 'tax havens', but no blacklist of tax havens has been published to date.

Action 13 - Re-examine transfer pricing documentation

For the most up-to-date list of country responses to Action 13, please visit the Action 13 country implementation summary page, which is updated weekly.

Action 14 – Make dispute resolution mechanisms more effective

  • Czech Republic — No action expected.
  • Ireland — Confirmed adherence to MAP minimum standard in October 2015, and formalizedAPA procedures in June 2016. Ireland is a member of the working group developing amandatory binding arbitration resolution mechanism.
  • New Zealand — New Zealand will be involved in OECD multilateral instrument discussions and negotiations. Note that New Zealand was prepared to commit to the mutual agreement procedure.
  • Romania – Changes to procedures for APAs and advance tax rulings as of 2016.
  • Sweden – The advance tax ruling procedure is under review.
  • Taiwan — Draft mutual agreement procedures guidelines are expected to be issued in 2016.

Action 15 – Develop a multilateral instrument

  • Bulgaria — Bulgaria is a member of the ad hoc group that is developing the multilateral instrument on tax treaty measures to tackle BEPS.
  • Canada Canada is taking part in the ad hoc group that is developing the multilateral instrument.
  • Ireland — Ireland is a member of this ad hoc group.
  • Luxembourg — Luxembourg is a member of the ad hoc group.
  • New Zealand — New Zealand will be involved in OECD multilateral instrument discussions and negotiations.
  • Russia — Russia is a member of the ad hoc group.
  • Turkey — Turkey is a member of the ad hoc group.
  • United Kingdom – The UK is a member of the ad hoc group.
  • United States The US is taking part in the ad hoc group that is developing the multilateral instrument.

 

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