Global Tax Update – June 2016
The January – March edition of tax highlights for the Asia Pacific region highlights industry developments from Australia, China, Hong Kong, India, Indonesia, Korea, Malaysia and Singapore including:
- Australia’s new tax system for Managed Investment Trusts
- The final stage of China’s B2V reform to be rolled out from 1 May
- Regulatory and tax updates from India.
On 28 April 2016, the Assistant Treasurer and Minister for Small Business signed the Asia Region Funds Passport’s Memorandum of Co-operation (MoC) with Japan, Korea and New Zealand. The Passport is an international initiative that facilitates the cross-border offering of eligible collective investment schemes while ensuring investor protection in economies participating in the Passport. The MoC sets out the internationally agreed rules and cooperation mechanisms of the Passport, and comes into effect on 30 June 2016.
Over forty countries (including Australia)
participated in an Anti-Corruption Summit held in London during May 2016. Participants agreed on a Global Declaration Against Corruption, which includes a commitment to expose corruption “by increasing the transparency of government budgets, tax information and procurement to deter tax evasion and expose the theft or misuse of taxpayers’ money.”
Australia/Germany Double Tax Agreement
The Commonwealth Parliament’s Joint Standing Committee on Treaties tabled its latest report which, among other items, addressed the new German-Australian double tax agreement (DTA). The Committee recommends that binding treaty action be taken in respect of this DTA.
The updated DTA is the first treaty to incorporate recommendations made by the Organisation of
Economic Co-Operation and Development (OECD) in the Base Erosion and Profit Shifting (BEPS) Action Plan (Action 6). It includes, for example, changes to the preamble, introduction of the ‘principal purpose test’ in the limitation of benefits clause, and updates the definition of permanent establishment. It is expected that this DTA will be used by Australia as a basis for future bilateral treaty negotiations.
Australian Country-by-Country reporting implementation
The Australian Taxation Office (ATO) has finalised its guidance on the ‘Local File’ element of the country-by-country reporting laws that apply from 1 January 2016. The Australian requirements will be unique. An OECD Local File is a local transfer pricing report; whereas in Australia the Local File will be an electronic form requiring detailed data to be reported on international related party transactions, as well other specified business information and documents such as organisation charts and intercompany agreements.
Separately, the Government has proposed an increase in the penalties for taxpayers who fail to comply with their filing obligations. The maximum penalty is proposed to increase to AUD 450,000.
The latest edition of PwC New Zealand’s Tax Tips considers the key proposals outlined in a new tax Bill introduced into the New Zealand (NZ) Parliament, which include:
- changes relating to closely-held companies
- changes to the non-resident withholding tax (NRWT) and approved issuer levy (AIL) rules for related party and branch lending
- amendments to the debt remission rules for debt remission between related or associated parties
- changes to allow commonly owned companies to transfer imputation credits as part of loss grouping
- goods and services tax (GST) amendments to ensure GST continues to function as a tax on consumption in New Zealand.
Tax Tips Alert May 2016 provides information on the Inland Revenue’s long awaited Issues Paper on proposed reforms to the tax laws applying to share schemes. The Issues Paper outlines a number of proposals which, if adopted, will completely change the way share schemes are taxed in New Zealand.
In the previous edition of PwC New Zealand’s Tax Tips an analysis of the New Zealand Budget 2016 business tax proposals is considered including an update on tax Bills update. Further insights, commentary and up-to-date news relating to New Zealand tax developments are also provided.
The United Kingdom (UK) Government announced in its 2016 Budget that new rules for addressing base erosion and profit shifting (BEPS) through interest expenses will be introduced from 1 April 2017. The new rules will be in line with the recommendations of the Organisation for Economic Co-operation and Development (OECD) by capping the amount of relief for interest to 30 per cent of taxable earnings before interest, depreciation and amortisation (EBITDA) in the UK, or based on the net interest to EBITDA ratio for the worldwide group. HM Treasury and HM Revenue & Customs have now issued a consultation document seeking views before 4 August 2016 on the detailed design and implementation of the new rules.
Canada, Iceland, India, Israel, New Zealand, the People’s Republic of China and Bermuda have signed the Multilateral Competent Authority agreement for the automatic exchange of Country-by-Country reports enabling automatic sharing of country-by-country reporting. This brings the total number of signatories to 39.
Bahrain, Lebanon, Nauru, Panama and Vanuatu have also committed to the international standard of automatic exchange of financial information (the Common Reporting Standard) to tackle tax evasion and avoidance.
The Tenth Meeting of the OECD Forum on Tax Administration (FTA) was held in Beijing on the 11-13 May 2016. The communiqué released at the close of the meeting sets out full details of the discussions which focused on three interlocking themes:
- effective implementation of the OECD/G20¬international tax agenda
- building modern tax administrations that effectively respond to the challenges and opportunities of an increasingly digital world
- helping build capacity in tax administration so that all countries can benefit from the changes in the international tax landscape.
The following publications were also released at this event:
- Tax Administrations and Capacity Building: A Collective Challenge
- Technologies for Better Tax Administration: A Practical Guide for Revenue Bodies
- Rethinking Tax Services: The Changing Role of Tax Service Providers in SME Tax Compliance
- Advanced Analytics for Better Tax Administration: Putting Data to Work
- Co-operative Tax Compliance: Building Better Tax Control Frameworks.