International tax update- August 2015
United Kingdom Budget
The Chancellor of the Exchequer delivered his Summer Budget to the United Kingdom (UK) Parliament on 8 July 2015. A number of personal, corporate and indirect tax-related measures were announced in the Budget including a reduced corporate tax rate; introduction of a bank corporation tax surcharge; a restriction on the ability to offset UK losses against a Controlled Foreign Company (CFC) charge; consultation on new measures to increase compliance and tax transparency in relation to large business tax strategies; a restriction on corporation tax relief for the cost of goodwill; and changes to the personal tax thresholds and non-domicile status rules for individuals. For further information on the corporate tax measures in the Budget, see this Tax Insights publication.
If you have any queries in relation to the Budget, or in relation to UK tax matters generally, contact Rob Hines on 61 (2) 8266 0281 or at firstname.lastname@example.org.
Board of Taxation to review implementation of anti-hybrid rules
As part of the 2015-16 Budget, the Commonwealth Treasurer wrote to the Board of Taxation (Board) requesting that it consult on implementation of anti-hybrid rules developed by the Organisation for Economic Co-operation and Development (OECD). On 14 July 2015, the Treasurer issued the following terms of reference for this project:
The Board of Taxation (Board) is asked to undertake consultation on the implementation of new tax laws to neutralise hybrid mismatch arrangements (anti-hybrid rules), pursuant to the recommendations of the G20 and OECD under Action Item 2 of the Base Erosion and Profit Shifting (BEPS) Action Plan.
Hybrid mismatch arrangements can be used to achieve double non-taxation, including long-term tax deferral. They reduce the collective tax base of countries around the world even if it may sometimes be difficult to determine which individual country has lost tax revenue. Under Action 2 of the BEPS Action Plan, the OECey
D has developed recommendations regarding the designof anti-hybrid rules.
Guidance on the practical operation of the rules and refinements on some outstanding issues will be released in a report in October 2015. The commentary will set out the principles underpinning therecommendations, agreed definitions and will include detailed examples of the practical application of the anti-hybrid rules.
The Board is asked to examine how best to implement anti-hybrid rules in the Australian legal context. In particular, the Board should identify an implementation strategy that has regard to:
4.1 Delivering on the objectives of eliminating double non-taxation, including long term tax deferral;
4.2 Economic costs for Australia
4.3 Compliance costs for taxpayers
4.4 Interactions between Australia’s domestic legislation (eg the debt-equity rules and regulated capital requirements for banks), international obligations (including tax treaties) and the new anti-hybrid rules.
The Board should conduct targeted consultation with relevant parties. We ask that the Board utilise its extensive links with tax professionals and key business groups. The Board should also work closely with Treasury and Australian Taxation Office in preparing its advice.
Further, the advice should utilise and build upon the conclusions of the Board’s recent review of Australia’s debt/equity rules and its consultation with businesses about their perspective on the G20/OECD BEPS Action Plan.
The Board is requested to report to Government by March 2016 to allow this issue to be considered as part of the 2016 Budget.