Latest news from international tax and transfer pricing

ATO issues guidance material on Automatic exchange of information regimes

The Australian Taxation Office (ATO) has issued guidance material on Australia's participation in Automatic Exchange of Information (AEOI) regimes. The guidance material concerns the automatic exchange of financial account information with foreign jurisdictions – in particular, the U.S. Foreign Account Tax Compliance Act (FATCA) and the Organisation for Economic Co-operation and Development (OECD) Common Reporting Standard (CRS).

The guidance material, which applies from 1 July 2017 (the date that the CRS applies in Australia), is structured around steps that an entity (typically a financial institution) would follow to determine whether it is required to implement the AEOI regimes, and if so, how. The key requirements involve:

 entities that are Reporting Financial Institutions

 reviewing their Financial Accounts

 to identify Reportable Accounts

 by applying due diligence rules

 then reporting the relevant information.

New Taxpayer Alerts on multinational arrangements

The ATO has issued the following Taxpayer Alerts (TA):

TA 2016/10: Cross-Border Round Robin Financing Arrangements

TA 2016/11: Restructures in response to the Multinational Anti Avoidance Law (MAAL) involving foreign partnerships.

Panama papers “week of action”

The Government has issued a media release regarding a "week of action" by the Serious Financial Crime Taskforce in response to tax evasion and crime identified in the Panama papers. This has included a series of unannounced access visits in Victoria and Queensland, and issue of search warrants following analysis of the leaked information. In addition, more than 100 taxpayers are to be contacted and advised they are the subject of compliance action, and further criminal investigations have not been ruled out.

The Commissioner of Taxation, Chris Jordan, also issued a statement about progress made in relation to dealing with issues exposed by the Panama papers.

Australia and Singapore to exchange information under CRS

The Inland Revenue Authority of Singapore (IRAS) and the ATO have entered into a  Competent Authority Agreement on the AEOI based on the CRS. Singapore and Australia will commence AEOI under the CRS by September 2018.

New Zealand to address hybrid mismatch arrangements

The New Zealand (NZ) Government has released a discussion document containing proposals to address hybrid mismatch arrangements. The discussion document proposes that NZ adopt the full range of OECD recommendations on hybrid mismatch arrangements with some minor adjustments. For further information, refer to PwC NZ’s Tax Tips Alert.

In addition, PwC NZ's Tax Tips - August 2016 provides further information and analysis on the key proposals outlined in the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Bill. The Bill was introduced into the NZ parliament on 8 August 2016, and implements the G20/OECD standard for Automatic Exchange of Financial Account Information in Tax Matters, and amends the NZ tax law to implement the new NZ disclosure requirements for foreign trusts.

United Kingdom launches offshore disclosure framework

Her Majesty's Revenue & Customs (HMRC) launched a new, tougher Worldwide Disclosure Facility on 5 September 2016. Consultation has commenced on the new legislation that will require taxpayers in the United Kingdom with outstanding tax liabilities relating to any offshore interests to voluntarily come forward and correct those liabilities by September 2018. This consultation invites views on the proposed principles and design TaxTalk Monthly October 2016 PwC 4 aspects including a toughened offshore penalties framework that will come into full effect after September 2018.

OECD and BEPS developments

The G20 Leaders’ Communique sets out the key discussion points and agreed actions from the two day G20 meeting in China held on 4 and 5 September 2016. The G20 Leaders reiterated international tax co-operation in the context of growth but also referred back to BEPS, automatic exchange of financial information, transparency and non-cooperative jurisdictions and capacity building.

Burkina Faso, Malaysia, Saint Kitts and Nevis, Saint Vincent and the Grenadines, Samoa and Pakistan have recently signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, bringing the total number of participating jurisdictions to 104. This Convention is the most comprehensive multilateral instrument available for all forms of tax co-operation to tackle tax evasion and avoidance, including exchange of information.

In addition, the OECD has published public comments received on recent consultations:

 the BEPS discussion draft on the design and operation of the group ratio rule under BEPS Action 4 (interest deductions and other financial payments), including the global submission from PwC

 the conforming amendments to Chapter IX of the OECD Transfer Pricing Guidelines, including the global submission from PwC

 the BEPS discussion drafts on the Attribution of Profits to Permanent Establishments and the Revised Guidance on Profit Splits – public consultation on these two discussion drafts will be held this October.

The OECD Secretary-General has released his tax report to the G20 leaders. Part I reports on the G20/OECD BEPS Project, tax transparency, tax policy tools to support sustainable and inclusive growth, and tax and development. Part II is a Progress Report to the G20 by the Global Forum on Transparency and Exchange of Information for Tax Purposes.

Unlawful State aid

At the end of August 2016, the European Commission (EC) announced the adoption of its final decision in the formal State aid investigation into the profit attribution arrangements and corporate taxation of Apple in Ireland. The EC concluded that, in its opinion, Apple benefitted from unlawful State aid granted by Ireland, and it ordered full recovery of the aid in an amount of up to €13 billion plus compound interest. The EC has clearly stated that the decision does not call into account Ireland’s general tax system or its corporate tax rate and notes also that no other companies in Ireland are subject to this decision. The Irish government has stated publicly that it will contest the negative decision. For further analysis on the European Commission findings, refer to this PwC Tax Insights.