Updates on tax transparency and disclosure since our last edition
Greece proposes new transfer pricing documentation requirements for Country-by-Country Reporting
On 20 July 2017, a draft law containing modifications to the Greek Corporate Income Tax L.4170/2013 and 4474/2017 was introduced to the Greek Parliament. The proposed modifications include supplementary transfer pricing documentation requirements in line with the European Union Guidance 2016/881. Under the draft law, the Country-by-Country (CbC) reporting requirements will be applicable for fiscal years starting on or after 1 January 2016.
Russian Government submits draft law on BEPS Action 13 and CRS implementation to State Duma
On 20 July 2017, the Russian Government submitted the draft law, Concerning the Introduction of Amendments to the Tax Code of the Russian Federation (in Connection with the Implementation of the International Automatic Exchange of Financial Account Information and Documentation for Multinational Groups of Companies), to the Russian State Duma. An EY tax alert summarizes the key changes as compared to the previous version of the draft law published for discussion on 6 March 2017.
OECD releases update of Guidance on the Implementation of Country-by-Country Reporting
On 18 July 2017, the Organisation for Economic Co-operation and Development (OECD) released an updated version of its Guidance on the Implementation of Country-by-Country Reporting (the Guidance). This update addresses two new questions: first, the Guidance addresses whether aggregated or consolidated data should be reported where there is more than one constituent entity in a jurisdiction; and, second, the treatment of an entity owned and/or operated by more than one unrelated MNE Groups, such as joint ventures.
New US IRS Country-by-Country Reporting site offers latest forms and guidance
The US Internal Revenue Service (IRS) recently launched a section on irs.gov dedicated to Country-by-Country (CbC) reporting. The website provides background information on CbC reporting, some frequently asked questions and other helpful resources. Of particular note, the website includes a list of jurisdictions that, to date, have concluded Competent Authority Arrangements with the United States (US). The website also includes a link to sign up for the Country-by-Country Reporting Newsletter, which the IRS intends to send out periodically with CbC-related updates.
The IRS also recently released the final Form 8975, Schedule A (Form 8975), as well as final instructions to the forms. The final forms and instructions do not substantively modify the previously released draft forms and instructions.
European Parliament votes in favor of public Country-by-Country reporting in first reading
On 4 July 2017, the European Parliament approved, in first reading, the joint report submitted by the Committee on Economic and Monetary Affairs and the Committee on Legal Affairs on the proposal for a directive of the European Parliament and the Council amending the Accounting Directive as regards disclosure of income tax information by certain undertakings and branches.
The matter has now been referred back to the committees responsible for interinstitutional negotiations (the so-called ”trilogue”) who will report to the Parliament within four months.
The joint report proposes to broaden the scope of the reporting obligation to any multinational enterprise (MNE) group, having an annual consolidated turnover of or exceeding €750 million, with undertakings or branches within the European Union (EU) and provides for exemptions in the case of commercially-sensitive information (which are closely monitored).
Furthermore, the public Country-by-Country (CbC) reporting requirements are more aligned to the non-public CbC reporting requirements under the Organisation for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) Action 13 on CbC reporting. A new revision clause stipulates that every four years, the European Commission has to carry out an impact assessment of the new reporting obligation.
In terms of the further procedure after the interinstitutional negotiations, the proposed directive will ultimately need to be adopted by the Council. At this time it is difficult to predict whether and to which extent this proposal will be acceptable to the Council, given the negative comments made by some Member States. If adopted, all EU Member States will need to transpose the text into national legislation.
European Commission proposes new transparency rules for intermediaries
On 21 June 2017, the European Commission published the Proposal for a Council Directive amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements (the proposal).
The proposal imposes obligations on European Union tax consultants, banks, lawyers, and other intermediaries to disclose any cross-border arrangement that contains one or more features or “hallmarks” and meets a somewhat unclear main benefit test.
The hallmarks include those around confidentiality or contingent fees used in other disclosure regimes, but also hallmarks such as deductible cross-border payments which are, for a list of reasons, not fully taxable where received, or the use of losses to reduce tax liability.
Where intermediaries are outside EU jurisdiction or prevented by law (e.g., professional secrecy or legal professional privilege) from disclosing information, the obligation to disclose is transferred to the taxpayer.
National laws will provide for appropriate sanctions for non-compliance.
It is foreseen that the new reporting requirements would enter into force on 1 January 2019, with EU Member States obliged to exchange information every three months after that.
Japan's Tax Authority establishes help desks to address transactions subject to contemporaneous documentation
Japan introduced new transfer pricing documentation1 requirements as part of the 2016 tax reform, aligning o BEPS Action 13 requirements.
In light of these developments, in June 2017, Japan’s National Tax Agency (NTA) published the Transfer Pricing Guidebook: Maintaining and Improving Voluntary Tax Compliance2 (Transfer Pricing Guidebook), comprising the following three sections:
I. NTA Transfer Pricing Initiatives and Policy: Future Policies and Initiatives for Transfer Pricing Documentation Requirements
II. Key Points in the Application of Transfer Pricing Regulations: Examination of the Implementation of Transfer Pricing Regulations
III. Contemporaneous Documentation Guide: Local File Examples
In addition, the Japanese government has established a network of help desks at 12 locations to handle individual inquiries regarding transactions subject to contemporaneous documentation.
Costa Rican Tax Administration temporarily suspends filing date for transfer pricing information return
Resolution DGT-R-28-2017 temporarily suspends the obligation to file the information return. Transfer pricing information returns for fiscal years 2015 and 2016 would have been due on 30 June 2017. This due date is now suspended until further notice. However, taxpayers should maintain the information that would be included on those information returns for when the Tax Administration requests the information.
Cyprus issues new Decree on Country-by- Country Reporting
On 26 May 2017, the Cypriot Ministry of Finance issued a new decree. The Decree replaces the previous decree dated 30 December 2016 and provides more clarity with respect to identifying the reporting entity for a Multinational Enterprise (MNE) Group and reporting deadlines in accordance with the recommendations of the Organisation for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) Action 13 on CbCR. Cyprus’ CbCR requirements took effect on 1 January 2016
Brazil amends Country-by-Country Reporting requirements to extend 31 July deadline for filing local reports for 2016
In Normative Instruction 1,709/2017 (NI 1,709/2017) (published 25 May 2017), Brazil amended its Country-by-Country (CbC) Reporting rules to include a “transitory rule” for 2016 that provides filing relief to Brazil constituent entities whose “ultimate parent entity” (UPE) is located in a jurisdiction with which Brazil does not have a qualifying competent authority agreement (QCAA) on the exchange of CbC reports. As a result of the amendment, the Brazilian constituent entity is not required to file the group’s CbC report in Brazil by 31 July 2017.
OECD releases update on CbC reporting implementation with focus on local filing in Brazil and China
On 4 May 2017, the Organisation for Economic Co-operation and Development (OECD) provided an update on the exchange relationships to automatically exchange Country-by-Country (CbC) reports. Along with this update, the OECD released a clarifying note regarding local filing in Brazil and China (Local Filing Update).