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OECD BEPS action plan reportstatus update December 2017

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OECD BEPS Action Plan Status Update Report

OECD BEPS Action Plan Report - Status Update - December 2017

Background• Taxation is at the core of countries’ sovereignty, but the interaction of domestic tax rules can lead to gaps and frictions;

• Existing tax rules have revealed numerous weaknesses;

• In the changing international tax environment, in combination with the ongoing financial crisis, concern has been expressed regarding the international tax standards;

• The G20 Finance Ministers called on the OECD to develop an Action Plan;

• The goal is to make fundamental changes to the current mechanism in order to:

– Prevent double non-taxation;

– Prevent no or low taxation;

– Develop new harmonized international standards on corporate income taxation at an international level;

• This resulted in the OECD BEPS Action Plan Report with 15 action points and corresponding timelines.

Objective• The PKF International Tax Network is pleased to provide you with a status update of the global implementation of the OECD BEPS Action Plan

Report;

• The PKF International Tax Network commits to update this report on a six-monthly basis.

For your convenience, please find a summary of the 15 Action Points discussed by the OECD BEPS Action Plan Report below:

Status UpdateDecember 2017



1Action Point

Digital economy

Action 1 aims to identify and address the

main challenges that the digital

economy poses for the existing

international tax rules

2Action Point

Hybrids

Action 2 aims to neutralize the

effects of hybrid mismatch

arrangements by making changes to

the Model Tax Convention and

providing recommendations

on the design of domestic rules to

prevent hybrids from being a

source of ‘double non – taxation’

3Action Point

CFC’s

Action 3 aims to develop

recommendations regarding the

design and strengthening of

controlled foreign corporation (CFC) rules, to address

concerns over the possibility of

creating affiliated non – resident taxpayers and

routing income of a resident enterprise through the non – resident affiliate or

avoid taxation

4Action Point

Interest deductions

Action 4 aims to limit base erosion

via interest deductions and

other financial payments.

Recommendations are expected to be

published for domestic law

limitations on tax deductions for both

related and unrelated party

interest expense and economically

equivalent payments. The workstream will

also develop guidance for the

transfer pricing of debt arrangements

5Action Point

Harmful tax practices

Action 5 aims to identify and counter

harmful tax practices, taking

into account transparency and

substance. The Action Plan will

look at developing both

recommendations on the definition of

harmful tax practices and a

strategy to expand to non – OECD

members

6Action Point

Prevent treaty abuse

Action 6 aims to prevent treaty

abuse, through developing model

treaty provisions and

recommendations regarding the

design of domestic rules to prevent the

granting of treaty benefits in

inappropriate circumstances

7Action Point

PE status

Action 7 aims to prevent the

artificial avoidance of Permanent Establishment

(“PE”) status, by redefining the threshold for

creating a PE to prevent base

erosion and profit shifting. The work

includes a focus on the use of

commissionaires and keeps some

specific activity exemptions, including for warehousing

8Action Point

TP - intangibles

Action 8 looks specifically at

intangibles and will develop transfer

pricing rules to prevent base

erosion and profit shifting where intangibles are

owned by, used by, contributed to or moved among group members

5



9Action Point

TP – capital related high-risk transactions

Action 9 looks specifically at risks and

will develop transfer pricing rules to prevent

base erosion and profit shifting by transferring risks

among, or allocating excessive capital to,

group members

10Action Point

TP – other high-risk transactions

Action 10 looks specifically at other

high-risk transactions and will develop

transfer pricing rules to prevent base erosion and profit shifting by

engaging in transactions which

would not, or would only very rarely, occur between third parties

Action Point

BEPS data collection

Action 11 aims to establish

methodologies to collect and analyse

data on BEPS and the actions to address it. The OECD intends to do this by developing

recommendations regarding indicators

of the scale and economic impact of

BEPS and ensure that tools are available to monitor and evaluate the effectiveness and economic impact of the actions taken to

address BEPS on an ongoing basis

Action Point

Disclosure of aggressive tax planning

Action 12 aims to require taxpayers

to disclose their aggressive tax planning arrangements. This will be addressed through

the development of recommendations

regarding the design of mandatory disclosure rules for aggressive or abusive transactions,

arrangements or structures, taking

into consideration the administrative costs

for tax administrations and businesses

and drawing on the experiences of the

increasing number of countries that already

have such rules

Action Point

TP – documentation

Action 13 aims to re- examine transfer

pricing documentation and will develop rules

regarding transfer pricing documentation

to enhance transparency for tax

administration, taking into consideration the compliance costs for

business

Action Point

Dispute resolution

Action 14 aims to make dispute

resolution mechanisms more effective,

through developing solutions to address

issues that prevent countries from

resolving treaty- related disputes under mutual agreement procedures

Action Point

Multilateral instrument

Action 15 aims to develop a multilateral instrument to enable

jurisdictions to implement measures

developed in the course of the work on BEPS and to amend

bilateral tax treaties

11 12 13 14 15



Country PageAlgeria 10

Argentina 12

Australia 14

Austria 16

Azerbaijan Republic 18

Belgium 20

Brazil 22

Bulgaria 24

Cameroon 26

Chili 28

China 30

Colombia 32

Costa Rica 34

Croatia 36

Cyprus 38

Czech Republic 40

Denmark 42

Egypt 44

Estonia 46

France 48

Germany 51

Greece 53

Hong Kong 55

Hungary 58

Country PageIndia 60

Ireland 62

Italy 65

Japan 68

Jordan 71

Kuwait 73

Latvia 75

Libya 77

Luxembourg 79

Macedonia 83

Malta 85

Mauritius 88

Mexico 90

Morocco 92

Nepal 94

Netherlands 96

New Zealand 100

Pakistan 102

Poland 104

Portugal 108

Qatar 110

Romania 113

Russia 115

Saudi Arabia 117

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The content of the PKF OECD BEPS Action Plan Status Update Report has been compiled and coordinated by both Kurt De Haen ([email protected]) and Janke Tierens ([email protected]) of PKF-VMB Tax Consultants cvba (PKF-VMB). Please contact Kurt or Janke should you have any questions, comments or suggestions.

Country PageSlovakia 119

Slovenia 122

South Africa 124

South Korea 127

Spain 129

Sultanate of Oman 132

Swaziland 134

Sweden 136

Switzerland 138

Thailand 142

Tunisia 144

Turkey 146

United Arab Emirates 149

United Kingdom 152

United States of America 157

Uruguay 159



Abbreviation DescriptionAEOI Automatic Exchange of (Financial Account) InformationAOA Authorized OECD ApproachAPA Advance Pricing AgreementATAD Anti-Tax Avoidance DirectiveB/S Balance SheetB2B Business to BusinessCbC Country-by-CountryCFC Controlled Foreign CorporationCRS Common Reporting Standard

DoTAS Disclosure of Tax Avoidance SchemeDTT Double Tax TreatyEBIT Earnings Before Interest and Taxes

EBITDA Earnings Before Interest, Taxes, Depreciation and AmortizationEEA European Economic Area

FATCA Foreign Account Tax Compliance ActFTA Forum on Tax Administration

GAAR General Anti-Abuse RuleGST Goods and Services TaxIP Intellectual Property

LoB Limitation on Benefits

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Abbreviation DescriptionLSA Location Specific AdvantagesMAP Mutual Agreement Procedure

MCAA Multilateral Competent Authority AgreementMLC Multilateral ControlsMNE Multinational EnterpriseMOF Ministry of Finance

MOSS Mini One Stop ShopNCST Non-Cooperation State or TerritoryNHTE New/High Technology EnterprisesOTD Offshore Taxation DivisionPE Permanent Establishment

PPT Principal Purpose TestPSD Parent Subsidiary DirectiveRCS Regulatory Capital SecuritiesSAT State Administration of Taxation

TCAL Tax Collection and Administration LawTIEA Tax Information Exchange AgreementTP Transfer PricingVAT Value Added TaxWHT Withholding Tax



Country AlgeriaPKF member firm Cabinet Meguellati

Your contact Anisse Raouf Benmeradi

Email [email protected]

Action Point Status of Action Point “In the pipeline”

1 Digital economy • No specific action taken yet. n/a

2 Hybrids • No specific action taken yet. n/a

3 CFC’s • There is no CFC legislation in Algeria. n/a

4 Interest deductions • No specific action taken yet. However, in Algeria exchange controls are very strict as multinational companies rarely use external financing either with related or unrelated parties, so this risk is indirectly neutralized.

n/a

5 Harmful tax practices • No specific action taken yet. n/a

6 Prevent treaty abuse • No specific action taken yet. n/a

7 PE status • No specific action taken. However, for construction projects domestic tax law obliges foreign companies to create a temporary PE once the contract exceeds an average duration of 6 months.

n/a

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8 TP - intangibles • No specific action taken yet. n/a

9 TP – capital related high-risk transactions

• No specific action taken yet. n/a

10 TP – other high-risk transactions


11 BEPS data collection

• TP documentation must be prepared and submitted by all specified ‘large entities’ at the DGE along with the annual tax return (no later than 30 April of each year). Even if not a ‘large entity’ it is still necessary to compile supporting documentation to demonstrate the arm’s length nature of related party transactions in case a tax authority audit is conducted. Article 4 of the Decree dated 12 April 2012 states the basic TP information that a group must provide and the specific information that a company must provide.

n/a

12 Disclosure of aggressive tax planning


13 TP – documentation

• All the “Large entities” that are registered within DGE (large-sized taxpayers’ direction) must complete and submit a yearly TP documentation.

• Although Algerian TP legislation does not require any specific pricing method to be applied, the tax authority issued guidelines in 2010 referring to the OECD methods. Broadly, all OECD methods are acceptable where reasonable and relevant. However, in practice, the Algerian tax authorities apply a ‘comparability’ approach. We understand that the tax authority is strengthening its benchmarking / comparability capability by building its own internal database.

n/a

14 Dispute resolution • No specific action taken yet. n/a

15 Multilateral instrument • No specific action taken yet. n/a



Country ArgentinaPKF member firm PKF México

Your contact Jimy Cruz





3 CFC’s • No specific action taken yet. n/a

4 Interest deductions • No specific action taken yet. n/a



7 PE status • No specific action taken yet. n/a

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11 BEPS data collection • No specific action taken yet. n/a



13 TP – documentation • No specific action taken yet. n/a


15 Multilateral instrument

• Argentina is one of the 72 signatories of the MLI. The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a



Country AustraliaPKF member firm PKF Sydney

Your contact Robert Lynch



1 Digital economy • GST (VAT) is being extended to digital products and services supplied by non-residents to Australian consumers from 1 July 2017.

n/a

2 Hybrids • No specific action taken yet.

• The Board of Taxation has been asked to report to Treasury on the implementation of new tax laws to neutralize hybrid mismatch arrangements.


4 Interest deductions • Australia is unlikely to tighten its existing safe-harbour 60% debt to total asset thin capitalization rules.

n/a


6 Prevent treaty abuse • No specific action taken yet.• Australia will act to incorporate the OECD's

recommendations on treaty abuse into Australia's treaty practice.

7 PE status• Australia has introduced its own version of the UK’s Google tax to tax certain non-

residents as if they have a PE in Australia where certain steps have been taken which constitute the avoidance of a PE.

n/a

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• Australian taxpayers with accounting periods commencing on or after 1 January 2016 and where their global revenue exceeds A$ 1 billion will be required to file one or more of the following:

- CbC Report - Master-file - Local-file

n/a

14 Dispute resolution • No specific action taken yet.• Australia committed to mandatory binding

arbitration under the MAP.


• Australia is one of the 72 signatories to the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a



Country Austria PKF member firm PKF Österreicher-Staribacher (Vienna)

Your contact Thomas Ausserlechner




2 Hybrids• Austria implemented the July 2014 amendment of the EU PSD disallowing the benefits of the Directive (in

essence participation exemption relief) if the “dividend income” gives rise to a “tax deduction” in the source country.

n/a

3 CFC’s• There is no specific CFC legislation in Austria, but a regime similar to a PPT is in place for deciding on reliefs for

dividends and capital gains from foreign subsidiaries.n/a

4 Interest deductions• Austria has already introduced two specific restrictions for interest deductions within a group, i.e. for interest

on loans to finance intra-purchases of entities and for interest from low tax jurisdictions, but does not apply a general thin capitalization scheme.

n/a

5 Harmful tax practices • No specific action taken yet. See * below

6 Prevent treaty abuse• Regulations regarding the prevention of base erosion and profit shifting were adopted in the DTT between

Austria and Liechtenstein in order to prevent abusive advantages of the DTT.See * below

7 PE status • No specific action taken yet. See * below

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8 TP - intangibles • No specific action taken yet. See * below


• No specific action taken yet. See * below







• Austria has introduced mandatory CbC-reporting from 2016 onwards for businesses with sales of over EUR 750 million.

• For Austrian tax purposes, TP documentation should not mandatorily be filed but on- demand filing is required within 1 month (new TP documentation law just introduced).

n/a

14 Dispute resolution• Austria has announced to include such clauses in current and future treaties and has already done so in the

past with selected parties, such as Germany.n/a


• Austria is one of the 72 signatories to the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies. Austria was the first country to deposit the instrument of ratification with the OECD on 22 September 2017. The effective date is likely to be 1 January 2019.

n/a

* Will be considered upon conclusion of new treaties or revision of existing treaties.



Country Azerbajian Republic PKF member firm Zenith Audit

Your contact Ziya Husseinzadeh



1 Digital economy

• In accordance with the amendment on Articles 168.1.5, 169.1 and 169.3 of the Tax Code of the Azerbaijan Republic, services and works provided through e-commerce channels require payment of VAT.

• If a non-resident offering the services or works online does not have a tax registration in Azerbaijan, the transferring financial institution must accept VAT from a customer and pay it to the state budget.

• The VAT is not creditable.

n/a


3 CFC’s

• New rules approved by parliament on 23 December 2016 and generally applied since 1 January 2017 reflect amendments on TP rules with offshore companies. The new rules are in line with the OECD’s TP guidelines. The TP rules apply to “controlled transactions”, which mean transactions that take place between the following parties:

- An Azerbaijani resident and a non-resident related party; - An Azerbaijani PE of a non-resident and the non-resident (or its PE, branch office or any other division in a

foreign country); and - An Azerbaijani resident or Azerbaijan PE of a non-resident and an entity established (registered) in a country

with a preferential regime.

• Parties (whether individuals or legal persons) will be considered to be related in the following situations:

- One person directly or indirectly holds at least 20% of the shares or voting power in the other person; - One person reports to, or is under the direct or indirect control of, the other person; - Both persons are under the direct or indirect control of a third person; - Both persons have direct or indirect control of a third person; or - The persons are family members, as defined in the tax code.

n/a

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3 CFC’s (Continued)• A taxpayer must submit a report on its controlled transactions where the aggregate amount of such

transactions in a calendar year exceeds AZN 500.000. The report must be submitted by 31 March of the year following the year of the transactions.

n/a

4 Interest deductions• The earlier 3-year exemption period from Taxes of Interest on Bank Deposits and Dividends from Investment

Securities has been extended to seven years. This means that the exemption will be valid until 1 February 2023.

n/a

















Country Belgium PKF member firm PKF VMB Brussels

Your contact Kurt De Haen




2 Hybrids• New Belgian tax law disallowing the benefits of the EU PSD (in essence participation

exemption relief) if the “dividend income” gives rise to a “tax deduction” in the source country.

• Belgium is currently finalising the implementation of the EU ATAD Directive in domestic tax law, which will very likely come into effect as of 2020.

3 CFC’s • There is no CFC legislation in Belgium.• CFC legislation in accordance with EU

ATAD Directive is announced as of 2020.

4 Interest deductions• There is an equity-based thin capitalization rule in place for intercompany loans.

• No specific action taken yet.

• 30% EBITDA thin capitalization rule in accordance with EU ATAD Directive is announced as of 2020.

5 Harmful tax practices

• Belgian tax ruling commission only signs off on upfront tax ruling decisions if the transaction is embedded with relevant substance.

• Belgian tax ruling decisions regarding cross-border structures that were concluded as of 1 January 2015 are spontaneously shared with other jurisdictions.

• Pursuant to Belgian “Cayman tax” legislation, low-tax (<15%) foreign legal structures lacking both any genuine business rationale and local substance are considered transparent for Belgian tax purposes so that individuals subject to Belgian (non-)resident personal income tax and entities subject to Belgian non-for-profit income tax are taxable in Belgium on the income derived by the foreign legal structure.

• Current Belgian patent income deduction abolished with grandfathering period until 2021 and introduction of “85% innovation tax deduction” (with broader scope) as of 1 July 2016.

n/a

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6 Prevent treaty abuse• New Belgian tax law disallowing the benefits of the EU PSD (in essence 0% Belgian dividend

WHT) if “artificial structure”.n/a

7 PE status• Belgian tax ruling commission only signs off on upfront tax ruling decisions if the transaction is

embedded with relevant substance.

• A Circular Letter regarding profit- and loss allocation between a PE and its head office is currently being drafted.






11 BEPS data collection• Belgian tax ruling decisions regarding cross-border structures that were concluded as of 1

January 2015 are spontaneously shared with other jurisdictions.n/a


• Individuals subject to Belgian (non-)resident personal income tax have to report in their Belgian personal tax return if they are the founder, holder or beneficiary of a foreign legal structure and to what extent such structure is embedded with relevant business substance.

n/a

13 TP – documentation• As of 2016, mandatory TP documentation filing requirements (local file, master file, CbC report

and CbC notification) if conditions are satisfied.n/a

14 Dispute resolution• Belgium is one of the countries which actively participate in the regular debates of the MAP

Forum in order to boost the MAP provided by the current DTTs.n/a


• Belgium is one of the 72 signatories to the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a



Country BrazilPKF member firm PKF Brazil

Your contact Paulo Crepaldi



1 Digital economy • No specific action taken yet. See * below

2 Hybrids • No specific action taken yet. See * below

3 CFC’s• With the introduction of Law No. 12.973 and Normative Ruling 1.700, Brazilian law has become stricter regarding

the taxation of controlled companies, adopting worldwide taxation.See * below

4 Interest deductions• Thin capitalisation rules have been put in place since 2010, limiting the deduction of interest expenses paid or

due to related parties or companies established in tax havens. However, no specific action has been taken since.See * below

5 Harmful tax practices• A Provisional Measure introducing a new ancillary obligation regarding this matter had been proposed. However,

it was not converted into law. No specific action has been taken since.See * below

6 Prevent treaty abuse • No specific action taken yet. See * below


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11 BEPS data collection• No specific action taken yet. Although ECF is an electronic version of an Income Tax Return

in Brazil as from calendar year 2017 to inform CbC Report if a Brazilian company is the ultimate or controlled company of affiliates in countries subject to BEPS.

See * below


• A Provisional Measure introducing a new ancillary obligation regarding this matter had been proposed. However, it was not converted into law. No specific action has been taken since.

• Provisional Measure 685/15 was not converted into law: Its provisions are being discussed in the national congress for better implementation.

13 TP – documentation • No specific action taken yet. See * below

14 Dispute resolution • No specific action taken yet. See * below

15 Multilateral instrument • No specific action taken yet. See * below

* Whilst Brazil is not a member of the OECD, and will not specifically follow the 15 point action plan, it is taking steps towards OECD’s recommendations, promulgating domestic laws enforcing transparency in business relations. E.g. the Brazilian IRS (Receita Federal do Brasil) has issued a Normative Ruling enforcing the communication - through an ancillary obligation named ECF - of business transactions with companies that are members of the OECD, and therefore, subject to BEPS. In this CbC report, companies will be required to inform the IRS about controlling or controlled companies abroad and their operations with them and key aspects of the companies to cross-reference that information with the Country’s Tax Authorities that said company is established. In June 2016, the Standard for A in Tax Matters, edited in 1988, was ratified and is enforced in Brazil as from 1 January 2017.



Country BulgariaPKF member firm PKF Bulgaria

Your contact Venzi Vassilev





3 CFC’s • There is no CFC legislation in Bulgaria. n/a



• The Act on the Economic and Financial Relations with Companies Registered in Preferential Tax Regime Jurisdictions, the Persons Related to Them and their Beneficial Owners (the “Act”) entered into force on 3 January 2014. The Act imposes a prohibition for companies registered in preferential tax regime jurisdictions, and the persons related to them, to be directly or indirectly involved in the following activities: banking, insurance, pension & investment funds, mobile operators, mining, obtaining public procurement, concessions, public-private partnerships.

• Such companies are also disallowed to participate in privatisation transactions, as well as in companies with state or municipal ownership, in companies carrying out activities under the Independent Financial Audit Act, the Independent Valuators Act and the Renewable Energy Act, acquisition of state or municipal property, as well as ownership over land and forests from the state forest fund.

• The prohibition is also applicable to any persons related to those companies that are registered in preferential tax regime jurisdictions, including companies that have (in)direct control over such legal entities, as well as their subsidiaries.

n/a



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• The procedure and the forms to be used in filing CbC reports in Bulgaria as well as the related notification rules were approved on 31 October 2017, with the release of an Ordinance by the Bulgarian National Revenue Agency.

• The Ordinance sets out information to be filed in the CbC report and in the CbC notification filed by the taxpayers. The CbC report and notification are to be filed electronically and the electronic services on the tax authority's website are to be available no later than 1 December 2017.

• The first CbC report is to report information about the taxpayer group for tax years starting in:

- 2016 if the CbC report is submitted by the ultimate or surrogate parent company; or - 2017 if the CbC report is submitted by a constituent entity of the group.

• Thus, if CbC reports should be submitted by the ultimate or surrogate parent company that is a tax resident of Bulgaria, the first CbC report for the fiscal year starting 1 January 2016 and ending 31 December 2016 must be submitted before 31 December 2017.

• The due date for submitting the related CbC notification for a reporting fiscal year starting in 2016 is also 31 December 2017.

n/a



13 TP – documentation • For Bulgarian tax purposes, TP documentation should not mandatorily be filed. n/a



• Bulgaria is one of the 72 signatories to the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which was signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a



Country CameroonPKF member firm ACN & Co Certified Public Accountants and Registered Auditors

Your contact Office +237 233432533






4 Interest deductions• Exchange of Control requires a declaration of the loan contract with the MoF. Once that is done, companies are

allowed to pay interest on loans received, even on intragroup loans.n/a




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• TP transactions must be justified by means of contracts and actual work done and the amount must not be above 10% of profits before the deduction of the aforesaid charges.

n/a




13 TP – documentation • For Cameroon tax purposes, TP documentation should not mandatorily be filed. n/a





Country ChilePKF member firm PKF México











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13 TP – documentation• Chile established the obligation for taxpayers to submit documentation related to country by country archive.

The mechanism to present this documentation is through the sworn statement 1937 (Resolution 126).

• The relative to the local and master files is pending to be defined.



• Chile is one of the 72 signatories of the MLI. The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a



Country ChinaPKF member firm PKF China

Your contact Josephine Yanagi





3 CFC’s

• In process of improving CFC rules (e.g., elaborate the definition of “control” and clarify how to determine the attributable income, etc.).

• The OTD was established by the SAT in early 2015. OTD establishment is aiming to provide more services and enhance information collection capabilities.

• Revised CFC rules are reflected in the Discussion Draft of the revised Implementation Measures of the Special Tax Adjustment (Guoshuihan 2009 No. 2, Circular). The Discussion Draft is still open for public consultation, but expected to apply to fiscal year 2016.

4 Interest deductions

• Thin capitalisation rules are improved (e.g. scope of interest expenses clarified, a more reasonable debt/equity ratio and specific features of certain industries considered, and the carry forward or carry back of non-deductible interest expenses considered, etc.).

• Difficult to localize all BEPS recommendations at this stage; limitation only applied on interest deduction to related party loans.

• May apply limitation to interest deduction to both related party and non-related party loans when there is an opportunity to revise the CIT law in the future.


• Action point 5 Report was released in 2014, domestic interest on China’s CIT incentives provided to NHTE was high.

• China considers the NHTE incentive a harmful tax practice; however, it will not be suspended as China applies a more strict assessment method than BEPS recommends “Nexus approach”.

n/a


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7 PE status• The SAT work plan in relation to PE will focus on improving PE administrative rules and

strengthening the administrative practice.

• The SAT will establish a PE information sharing system between local-level state tax bureaus and local tax bureaus and enhance information with exit and entrance (immigration) administrations.

8 TP - intangibles

• In process of improving TP rules.• The SAT is of the view that it is necessary to analyse the contributions made by local Chinese

enterprises to intangibles so as to ensure contributions are reasonably compensated by foreign related parties, especially where the legal owner of the intangibles resides outside China.

• The SAT is also of the view that LSA also create values, and LSA has been well recognized in comparability analysis, contribution analysis and profit split consideration.

• Capital related risks are rather difficult to identify but easy to transfer. Consequently, in TP analysis, risks should not be assessed alone, without considering the functions.

• The Discussion Draft does not provide safe harbour rules on low value-adding services.

• The Discussion Draft is still open for public consultation, expected to be officially released in later 2016, and apply to fiscal year 2016.

9TP – capital related high-risk transactions • See action point 8. • See action point 8.

10TP – other high-risk transactions • See action point 8. • See action point 8.



• The SAT task force member disclosed that in the revision of the TCAL, the SAT plans to bring in the mandatory disclosures regime under which taxpayers or scheme promoters are obliged to disclose their aggressive tax planning information to the tax authorities.

n/a

13 TP – documentation• The SAT has introduced the new TP documentation requirements in the Discussion Draft.• There are indeed additional requirements which are not found in the BEPS recommendations,

for example, the addition of the value chain analysis in China’s TP documentation requirements.

• The Discussion Draft is still open for public consultation, expected to be officially released in later 2016, and apply to fiscal year 2016.

14 Dispute resolution• China does not accept the mandatory binding arbitration under MAP in action point 14 Report.• The SAT still supports action point 14 and will try its best to improve the efficiency of the MAP

process in China.n/a

15 Multilateral instrument• China is one of the 72 signatories to the MLI. The MLI, which has been signed on 7 June 2017,

offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a



Country ColombiaPKF member firm PKF México











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13 TP – documentation• Colombia established the obligation for taxpayers to submit documentation related to country by country

archive (Article 260-5 "documentary evidence" of the Tax Statute of Colombia). The mechanism to deliver this documentation is through the format "Report country by country report" (Decree 2120 of December 15, 2017).

• The relative to the local and master files is pending to be defined.



• Colombia is one of the 72 signatories of the MLI. The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a



Country Costa Rica PKF member firm PKF México











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13 TP – documentation• Costa Rica established the obligation for taxpayers to submit documentation related to local and master

archives. The mechanism to present this documentation is to be defined (Resolution on Documentation of Transfer Prices DGT-R-16-2017).

n/a



• Costa Rica is one of the 72 signatories of the MLI. The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a



Country CroatiaPKF member firm PKF TAX CONSULTING ANTIČIĆ d.o.o.

Your contact Diana Anticic - +385 9140 00333




2 Hybrids

• The Croatian tax regulations stipulate that the rights related to tax cuts, exemptions, tax exemptions and tax deductions or reductions in tax liability may not be used by the taxpayer for arrangements or a range of non-authentic arrangements.

• Arrangements (or series of arrangements) are not considered authentic if it is established that the taxpayer has established them for the exercise of the aforementioned rights as a principal purpose or as one of the main purposes.

n/a

3 CFC’s

• Croatian tax regulations have implemented provisions aimed to combat tax evasion and transfer of state profits. This refers to the calculation of withholding tax that Croatian companies have to account for in the following cases: (i) payment of profits (dividends) to legal entities at a rate of 12%; (ii) license at a rate of 15%, (iii) interest at a rate of 15%, (iv) market research, tax and business consulting services and auditing services, paid to foreigners at a rate of 15% or (v) services not listed above, but they are paid to legal entities from countries considered as tax haven at a rate of 20%.

n/a


• Interest paid on loans is not recognized for tax purposes (to the payer, domestic company) which are received from a shareholder or a member of a company holding at least 25% of the shares or equity or voting rights of the taxpayer, if at any time in the taxable period these loans exceed the amount of four times the shareholder’s or a member’s share in the capital or voting rights.

n/a



37




7 PE status• The definition of PE for Croatian tax purposes follows in general terms the wording of article 5 of the OECD Model

Tax Convention.n/a


9 TP – capital related high-risk transactions • No specific action taken yet n/a

10 TP – other high-risk transactions • No specific action taken yet n/a

11 BEPS data collection• Regulation on CbC reports, Law on administrative cooperation in the field of taxation (NN 115/16) and the

Rulebook on AEOI in the field of taxation (NN 18/17.) have been in force since 2017.n/a


• In 2017, the Rulebook on AEOI in the area of taxation was adopted and applies to EU Member States. Croatia also applies the AEOI within the framework of Directives 2003/48 / EC and Directive 2011/16 / EU.

• Croatia applies the Convention on mutual administrative assistance in tax matters in relation to VAT, Income Tax, Profit Tax and Real Property Tax.

n/a


• Croatian taxpayers are required to have the appropriate documentation (TP study) that provides data and information about affiliated persons and business relationships with those persons, the methods used to determine comparable market prices and the reasons for choosing specific methods.

• Since 2017, a regulation has been passed that enables the conclusion of the previous TP agreement between the taxpayer and the Tax Administration.

n/a

14 Dispute resolution

• As from 1 January 2015, Croatia applies the EU Arbitration Convention on TP. The purpose of the Convention is to improve the procedures of the competent authorities in solving such cases so that if the competent authorities (tax authorities of a particular country) cannot resolve the double taxation case within two years, the Advisory Committee makes this opinion in the concrete case and is binding.

n/a


• Croatia joined FATCA and CRS agreements which are aimed to fight tax evasion through the AEOI between the countries.

• Croatia is one of the 72 signatories to the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a



Country CyprusPKF member firm PKF Savvides & Co Ltd

Your contact Nicholas Stavrinides




2 Hybrids• Cyprus approved the July 2014 amendment of the EU PSD disallowing the benefits of the Directive (in essence

participation exemption relief) if the “dividend income” gave rise to a “tax deduction” in the source country.n/a

3 CFC’s• Cyprus has CFC rules saying that overseas dividend income is only tax-exempt in Cyprus if the dividend

distributing company derives its income (in)directly from non-investment activities or if substantially low tax has been paid on those profits.

n/a

4 Interest deductions • Cyprus has existing interest expense restriction criteria where borrowings exist to finance non-business assets. n/a


• The Cyprus Parliament voted on 14 October 2016 a number of amendments to the Cyprus IP Box regime in order to fully comply from now on with the relevant OECD recommendations relating to BEPS Action 5.

• The amendments do not materially affect the existing IP tax regime, which will be valid until 30 June 2021, nor do they alter the current effective tax rate of 2,5%. They actually introduce a new IP regime, which is based on the Modified Nexus Approach (see New Cyprus IP Box Regime (c) below) in calculating the amount of profits which will be subject to the 80% exemption.

• They concentrate on the application of this nexus approach and provide guidance on what constitutes a qualifying IP asset, qualifying income and qualifying expenditure. They further enhance the Cyprus position as a jurisdiction for R&D as businesses may benefit from the preferential regime within the framework agreed internationally.

n/a


39




7 PE status • No specific action taken yet other than the definitions followed in OECD model DTT. n/a

8 TP - intangibles• No specific action taken yet other than application of arm’s length principle on related party transactions and

the actions taken referred to Action point 5.n/a


• No specific action taken yet other than application of arm’s length principle on related party transactions. n/a


• No specific action taken yet other than application of arm’s length principle on related party transactions. See * below





• Cypriot MoF issued a Decree pursuant to Article 6 (16) of Assessment and Collection of Taxes Law on CbC Reporting (the Decree). The Decree is in accordance with an EU Directive of 25 May 2016 requiring all EU Member States to implement a CbC Reporting obligation in their national legislation in accordance with the recommendations on CbCR of action point 13. All Cypriot tax resident entities that are part of an MNE Group with consolidated group revenue of EUR 750 million and above will need to comply with the CbCR requirements for financial years starting on or after 1 January 2016.

n/a



• Cyprus is one of the 72 signatories to the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a

* The Ministry of Finance announced that the acceptable taxable net profit margins on back-to-back financing arrangements will be set through TP rules and possibly the submission by the taxpayer of TP documentation that should be prepared by an independent advisor. Although those TP rules have not yet been finalised or published by the Commissioner of Taxation, they are expected to be consistent with the OECD guidelines.



Country Czech RepublicPKF member firm APOGEO, s.r.o.

Your contact Jaroslava Hanková




2 Hybrids • The implementation is expected in 2020. The rules are in the consultation stage. n/a

3 CFC’s • The deadline for the implementation is not determined. The rule is at the stage of the consultation. n/a


• Czech income tax law specifies the rules for interest deductions between related parties

- Thin capitalization rules exist in the Czech Republic: - The thin capitalization rules apply to related-party loans only and the test captures not only interest but

‘financial costs’ on loans as well; - The debt-to-equity ratio for related-party loans is 4:1 (6:1 for financial services industry); - Interest on profit-participating loans is not tax deductible.

• Change in the tax legislation specifying the rules for interest deduction will be implemented in 2019. The legislative process will begin in 2018.

n/a


6 Prevent treaty abuse

• The Czech tax law includes a clause which prevents the benefits of DTTs or favourable tax regimes. Upon mutual agreement, the competent authorities may deny the benefits to any person, or to any transaction undertaken by such a person, if in their view the main purpose of the creation or existence of such a person was to obtain the latter benefits that would otherwise not have been available. The rule is applied in administrative procedures and practice of the court. The new implementation is not needed.

n/a


41




8 TP - intangibles• Since 2015 taxpayers are obliged to file a separate attachment to the income tax return to declare selected

transactions with related persons.n/a


• Since 2015 taxpayers are obliged to file a separate attachment to the income tax return to declare selected transactions with related persons.

n/a


• Since 2015 tax payers are obliged to file a separate attachment to the income tax return to declare selected transactions with related persons. The scrutiny of transfer prices has been increased.

n/a



• New TP requirements. n/a

13 TP – documentation• TP documentation should not be filed mandatorily but it is recommended. Since 2015 taxpayers are obliged to

file a separate attachment to the income tax return to declare selected transactions with related persons.n/a



• MLC tax audit under Council Directive.

• The Czech Republic is one of the 72 signatories to the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a



Country DenmarkPKF member firm PKF Munkebo Vindelev

Your contact Kasper Vindelev



1 Digital economy • No specific action taken yet.

• The Danish Government will develop a digital reporting system which enables digital platforms and payment solutions to submit the information of the users' income to the Danish tax authorities.

2 Hybrids• Denmark has approved and implemented the July 2014 amendment of the EU PSD disallowing

the benefits of the Directive (in essence participation exemption relief) if the “dividend income” gives rise to a “tax deduction” in the source country.

n/a

3 CFC’s

• No specific action taken lately – however in January 2016 the Legal Guide 2016-1 from the Danish tax authorities was issued, providing information on the Danish CFC rules. It is required for Danish companies to include income from foreign and domestic subsidiaries and foreign PE’s if the Danish parent company owns more than 50% of the capital or has more than 50% of the voting rights in the PE or subsidiary, if more than half of the subsidiary’s taxable income is from passive forms of income such as interest, royalty, capital gains etc. and if the subsidiary’s assets generating the passive income are more than 10% of the subsidiary’s total assets.

n/a


• No specific action taken lately. However, Denmark has existing interest deduction restrictions. Its thin capitalization rules follow three main criteria:

- A debt-to-equity ratio of 4:1; - An asset-based rule that applies in relation to financing costs that remain after the thin cap

limitation; and; - An EBIT based rule which restricts the deductibility of financing costs which remain following

the thin cap-test and the asset-based rule to an amount equating to 80% of the Danish company’s/tax group’s taxable EBIT income.

n/a

43




5 Harmful tax practices • No specific action taken yet.• This agreement contains actions for

increased advisory responsibility.


• Denmark has implemented legislation to meet action point 6 to prevent treaty abuse by introducing a new international anti-abuse tax rule (GAAR), which denies tax treaty and EU tax directive benefits in cases of deemed abuse. However, if the arrangement or transaction(s) is consistent with the contents and purpose of the relevant article, the taxpayer can still receive the benefit.

• This agreement contains a statement that the government in June 2017 will sign the OECD’s Multilateral Convention for the implementation of the BEPS elements relating to DTTs.


8 TP - intangibles • Denmark’s TP rules generally meet the 2010 OECD TP Guidelines.• When the OECD’s TP Guidelines are

updated, the Danish rules will follow.

9 TP – capital related high-risk transactions • See action point 8. • See action point 8.

10 TP – other high-risk transactions • See action point 8. • See action point 8.

11 BEPS data collection• This agreement contains a statement that Denmark will begin exchanging CRS-data about

financial accounts as of September 2017 and country-by-country reporting as of 2018.n/a



• This agreement contains actions for increased advisory responsibility as well as other planned actions against aggressive tax planning.

13 TP – documentation• Denmark has implemented legislation including requirements regarding a Master File, Local File

and for MNE’s to file a CbC report.n/a



• MLC tax audit under Council Directive.

• Denmark is one of the 72 signatories to the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a

* In May 2017, the Danish government signed an agreement with a majority of other parties in the Danish Parliament about strengthened efforts against international tax evasion.



Country EgyptPKF member firm PKF Rashed, Badr& Co.

Your contact Hany Rashed



1 Digital economy• Issuing VAT.

• Issuing new investment law.

• VAT was introduced as from 1 September 2016 at a 13% rate. The rate was increased to 14% as from 1 July 2017.

• The new investment law was issued and its executive regulations apply as from 1 November 2017.


3 CFC’s• The new investment law grants the ability to transfer profit distributions after deducting the

dividend tax that ranges from 5% to 10%.n/a

4 Interest deductions• No specific action taken lately However, Egypt has existing interest deduction restrictions.

Its thin capitalisation rules follow main criteria:

• A debt-to-equity ratio of 4:1.

n/a

5 Harmful tax practices • No specific action taken yet. • Egypt has concluded many DTTs.

6 Prevent treaty abuse• There are no procedures to prevent the inclusion of benefits into agreements and treaties.

• The dividend tax is applicable as from 2015.n/a


45




8 TP - intangibles • There is tax legislation regulating transactions between related parties. n/a








13 TP – documentation• According to tax law, certain information that clarifies transactions with related parties is to be attached to the

tax return.n/a

14 Dispute resolution • DTTs may contain provisions for dispute resolution between companies, if any. n/a




Country EstoniaPKF member firm PKF Estonia

Your contact Rein Ruusalu





3 CFC’s • There is no CFC legislation in Estonia. n/a





47















• Estonia has expressed the intention to sign the MLI. The MLI, which has been signed by 72 countries so far (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf), offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a



Country FrancePKF member firm PKF Cogeparc

Your contact Stéphane Michoud




2 Hybrids • French tax law provides that the benefit of the PSD regime does not apply to hybrid instruments. n/a

3 CFC’s

• CFC rules apply to resident companies that directly or indirectly hold a participation of more than 50% in a foreign legal entity or PE that is established or incorporated in a country with an effective tax rate that is at least 50% lower than that of France.

• EU companies are outside the scope of the CFC rules (unless the structure was put in place to avoid tax), and the CFC rules also may not apply to a CFC that is outside the EU in certain circumstances.

• An anti-abuse provision reduces the participation threshold to 5% where more than 50% of the shares in the foreign entity are owned by French companies or by foreign entities directly or indirectly controlled by a French company.

• A similar set of rules applies to individuals.

n/a


• As a general rule, tax deduction of interest is limited to the average bank interest rate for corporate loans with a duration of more than 2 years; or to the higher market rate.

• Other traditional limitations on the deductibility of interest apply only to specific, potentially abusive transactions. The rule generally known as the Charasse amendment limits the deductibility of interest on debt incurred to acquire related party shares followed by the inclusion of both entities in the same tax group. French tax law disallows an interest deduction on a loan granted by an affiliated company if the interest is not subject to a tax at the level of lending company that is equal to at least 25% of the tax that would have been due under the normal French rules.

• Interest expenses due by a French company in relation to intragroup loans and also third party loans guaranteed by an affiliated company are not fully tax deductible if three ratios are cumulatively exceeded in the relevant fiscal year (when excess interest equals max EUR 150.000):

n/a

49




4 Interest deductions (Continued)

- The debt/equity ratio: the average amount of intragroup loans must not exceed 1.5 times the amount of the net equity (or the amount of share capital if this is a higher amount) of the French company;

- The earnings ratio: the amount of interest expenses relating to qualified loans must not exceed 25% of the current-year EBITDA;

- The interest income test: the amount of interest expenses relating to qualified related party loans must be less than the amount of interest income received by the company from related entities.

• Interest on shareholding loans is only deductible if the decisions were taken in France.

• If accrued interest exceeds EUR 3 million, tax deduction is capped at 75% of the net interest charges.

n/a


• A French resident having a min. 10% shareholding or having operations with an entity located in a NCST is taxed on that entity’s income, even though the revenue has not been distributed or effectively received by the French resident.

• Sums received by a non-resident for services rendered by a French resident or for services rendered in France by a non-resident are taxable in France in the hands of the service provider if certain conditions are met.

• Not at arm’s length payments are disallowed if the beneficiary is subject to a privileged fiscal regime i.e. if it is not subject to taxes on profits or income or if it is subject to a tax rate lower than 50% of the French rate.

• Dividends, interest, royalties and service fees paid to companies located in a NCST may be subject to a 75% WHT.

• Dividends received from NCST entities cannot benefit from the participation exemption, except if business drivers can de demonstrated.

n/a

6 Prevent treaty abuse • Some tax treaties with France comprise a GAAR rule while others contain a specific LoB rule, or PPT rules. n/a

7 PE status • Specific rules to compute duration of “construction site” PE and introduction of a service PE. n/a

8 TP - intangibles • No specific action taken since current TP rules should suffice. n/a

9TP – capital related high-risk transactions








• All French entities with turnover or gross assets on the B/S exceeding EUR 400 million, or

• With a >50% direct or indirect subsidiary meeting this threshold are subject to the updated French TP documentation requirements.

• This includes the obligation to disclose foreign tax rulings to the French tax ruling authorities.

n/a


• The French tax administration has posted an updated list of “abusive” practices or arrangements on its website. n/a


• All French entities with turnover or gross assets on the B/S exceeding EUR 400 million, or with a >50% direct or indirect subsidiary meeting this threshold are subject to the updated French TP documentation requirements.

• Parent companies of multinational groups with annual revenue exceeding EUR 750 million would be required to file a CbC report within 12 months following the end of the fiscal year. Failure to file this report would be subject to a EUR 100,000 penalty.

• The tax administration in France would then transmit the CbC reports to other countries where the group has its operations, via an information exchange mechanism provided for by the DTTs, under the condition of reciprocity.

• The CbC reporting requirement would also apply to French subsidiaries of MNEs whose “head company” is established in a country or territory that does not share CbC reports with France.

• The CbC disclosure would be made public.

14 Dispute resolution • A dispute resolution rule is included in the majority of the French DTTs. n/a


• France is one of the 72 signatories to the MLI. The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a

51



Country GermanyPKF member firm PKF Fasselt Schlange

Your contact Wolfgang van Kerkom




2 Hybrids

• Applying the correspondence principle Germany installed a set of effective linking rules granting tax exemption of dividend income only if there is no deductibility in the state of source and vice versa tax deductibility of interest expenses and losses from tax group companies are only granted if there is no deductibility in the source state.

• The same applies to the tax deductibility of interest expenses inside transparent structures.

• Implementation of a general clause into domestic tax law stipulates a non-deductibility of expenses, if the corresponding income is not subject to tax for the recipient.

3 CFC’s

• The German CFC regime exists for decades. It is in principle applicable if more than 50% of the shares in a foreign entity are controlled by German residents and the income of the entity qualifies as passive and is taxed below an effective rate of 25%. The CFC regime is regarded to require modernization to be in line with the final OECD report.

• The Foreign Tax Act (AStG) will be assessed whether there is a need for amendment. The modernization of the Act is deemed necessary by the German authorities.

4 Interest deductions• The German interest barrier regime comprising a de minimis threshold, an EBITDA based

limitation and carry forward regulations has proved to be an effective instrument in preventing base erosion through interest expenses.

n/a


• The legal basis is implemented to adopt an ordinance on the obligation to grant transparency among tax administrations of EU member states by AEOI on tax rulings and APAs.

• AEOI with OECD member states is based on the bilateral Tax Treaties with Germany or on the Convention on Mutual Administrative Assistance in Tax Matters.

• In Germany, there is no preferential IP regime, except for tonnage tax for domestic shipping companies.

• The existing rules regarding “transfer of functions” make it difficult to transfer valuable assets such as IP out of Germany.

n/a




6 Prevent treaty abuse• Limitations to Treaty Benefits in case of Treaty Shopping and other situations are stipulated in

national German provisions.

• Germany seeks to install LoB, switch-over and subject-to-tax clauses in treaties.

n/a

7 PE status • German tax law already addresses the issue of artificial avoidance of a PE.• Definition of PE under national law will

be reviewed.

8 TP - intangibles • Tight examination of TP under existing German rules and regulations in tax audits. n/a


• Tight examination of TP under existing German rules and regulations in tax audits. n/a


• Tight examination of TP under existing German rules and regulations in tax audits. n/a


• The German Federal Council (Bundesrat) approved the Combating Tax Evasion Law, obliging tax subjects to disclose detailed and far reaching facts relevant for potential taxation.

• At national level, certain BEPS relevant data is collected and evaluated by Federal Central Tax Office.

n/a


• No specific action taken yet. • Under review by the federal government.


• The legal basis to adopt an ordinance on the obligation to document TP in a Master and a Local File is implemented.

• CbC Reporting obligation is implemented: it has to be filed annually and by 31 December 2017 for the first time.

• TP Documentation Ordinance including details on Master and Local files is in the legislative procedure.



• Germany is one of the 72 signatories to the MLI. The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

• Implementation into German law is expected soon.

53



Country GreecePKF member firm PKF Euroauditing SA

Your contact Andreas Pournos, George Starakis

Email [email protected], [email protected]


1 Digital economy• No specific action taken yet. The primary legislative source is the VAT regulation with regard to e-commerce

transactions.n/a

2 Hybrids

• Greece has transposed into national legislation the EU Directive 2011/98. The approval of the 86/2014 amendment is still pending. The deadline for adoption is common to all member states (31 December 2019, extended to 31 December 2021 for hybrid provisions). On 7 June 2017, by signing the multilateral agreement Greece adhered to the MLI which provides the exception method to avoid double taxation for transparent entities.

n/a

3 CFC’s• Greece has put in place rules to restrict profit shifting, i.e. posing quantitative and qualitative criteria to quantify

taxable non-distributed income. However, the exact application of the rules remains problematic. n/a

4 Interest deductions• Interest is only tax-deductible if at arm’s length or subject to a thin cap rule determined with respect to the taxable

profits before EBITDA. Interest expenses are not deductible where the surplus of interest expenses over interest income exceeds 30% of EBITDA.

n/a


• Greece has rules and procedures to facilitate the exchange information on (in)direct tax issues.

• The EU PSD, introduced in March 2016, prohibits the exemption of dividend income and the relative WHT exemption in case of artificial transactions.

• There is a list of jurisdictions with preferential tax regimes as well as jurisdictions considered harmful as they have not adhered to the OECD Model DTT.

n/a

6 Prevent treaty abuse• On 7 June 2017, by signing the multilateral agreement Greece adhered to the MLI which includes measures for

preventing the artificial avoidance of PE status.n/a

7 PE status • According to current legislation, there are specific criteria to restrict the possibility to avoid the PE status. n/a




8 TP - intangibles• With the L 4172/2013, OECD guidelines for TP are introduced as the application tool and interpretation

framework. Any changes to OECD guidelines have immediate effect.n/a


• See action point 8. n/a



11 BEPS data collection• With L 4484/2017 and L. 4490/2017, regulations have been introduced for the automatic exchange of financial

account information and for CbC reporting for MNEs with consolidated income exceeding EUR 750 million.n/a




• The current legislation requires full TP documentation and increased disclosure requirements not only for MNEs but also for domestic groups.

• Minor changes and corrections have taken place mainly regarding deadlines for the submission of relevant documentation to the tax authorities.

n/a


• The new procedural tax code contains a provision for the implementation of appeals to the administrative and tax authorities. In addition, further enhancement is expected to be achieved after the harmonization of the legal framework with EU directive 2015/2376, with L 34474/2017, with regard to advanced cross boarder agreements and advanced transfer pricing agreements.

n/a


• Greece is one of the 72 signatories to the MLI. The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a

55



Country Hong KongPKF member firm PKF Hong Kong

Your contact Candice Ng




2 Hybrids

• The Hong Kong Inland Revenue Department (“IRD”) noted that the BEPS project has an action plan to neutralise the effects of hybrid mismatch arrangements and is considering issuing a practice note regarding this action plan in light of the release of the BEPS final reports.

• A bill was passed on 26 May 2016 to clarify the profits tax and stamp duty treatment of RCS including certain hybrid instruments issued by financial institutions to meet the Basel III capital adequacy requirements.

n/a

3 CFC’s• As Hong Kong adopts a source-based taxation system, there are no CFC rules and no specific

action is expected.n/a


• The IRD has been heavily regulating the deduction of interest expenses in Hong Kong. The IRD considered that the current rules and practices are effective in defending against potential abusive deduction of interest expenses.

• Hong Kong currently has no group ratio, fixed ratio or thin capitalization rules.

n/a


• The progress report issued by the OECD’s Forum on Harmful Tax Practices (FHTP) on 16 October 2017 indicates that the aircraft leasing tax treatment and exemption for ships operators in Hong Kong are in line with the requirements under Action 5 of BEPS.

• As Hong Kong has become a BEPS associate, it is committed to comply with BEPS minimum standards including Action 5.

• The Government is reviewing and amending the tax concessions for corporate treasury centres, professional reinsurers and captive insurers to observe BEPS standards.





• The IRD is taking a more prudent approach in granting tax resident certificates. The IRD would consider whether the applicants are eligible for treaty benefits before issuance of the certificates. The IRD is considering issuing a practice note to clarify the tax treatment in this regard.

• The Government indicates that only a PPT may be included in Hong Kong tax treaties in the future.


• The IRD plans to amend future tax treaties and issue a relevant practice note in respect of granting tax resident certificates.

7 PE status • The IRD is considering issuing a practice note to provide more guidelines and amend the legislation. n/a

8 TP - intangibles

• The IRD would treat TP as a high priority and intends to issue a further practice note regarding Actions 8 to 10.

• On 31 July 2017, the Hong Kong Government released its Consultation Report on the measures to codify the TP regulations with reference to BEPS into the domestic legislation. However, the relevant laws have not yet been enacted and no detailed guidelines have yet been published.

• An amendment bill will be introduced by the end of 2017 or early 2018.


• See action point 8. • See action point 8.


• See action point 8. • See action point 8.



• The legislation on AEOI as promulgated by the OECD was introduced and came into effect on 30 June 2016.

• Financial institutions are expected to report financial accounts held by tax residents of overseas reportable jurisdictions to the IRD on an annual basis.

• A new anti-avoidance provision is also introduced in tax laws, which voids any arrangement entered into by a person, if the aim of such arrangement is to avoid any AEOI due diligence or reporting obligations.

• An amendment of AEOI regulations came into effect on 1 July 2017 under which the list of reportable jurisdictions is expanded to cover 75 jurisdictions, which comprises 14 confirmed AEOI partners and 61 prospective AEOI partners.

• Reporting financial institutions should register with the IRD by September 2017 and the first AEOI returns will be issued by the IRD in early 2018.

57





• The Consultation Paper published by the Government on 26 October 2016 suggested to introduce the three-tier TP documentation requirements stipulated in BEPS Action 13.

• The Government further released the Consultation Report on 31 July 2017 which clarifies certain issues and extends the exemption from preparing the master file and local file to certain small sized enterprises and those enterprises with relatively small amounts of related party transactions.

• The new TP rules would cover not only transactions of assets and services, but also financial or business arrangements like the making of loans between intra-group companies. However, the Government has no intention to introduce thin capitalisation rules at this stage.

• CbC reports will be required to be filed within 12 months after the end of the relevant accounting period commencing on or after 1 January 2018. The first CbC reports will be filed in 2019.

• The Government is expected to introduce relevant amendment bills by the end of 2017 or early 2018.


• The IRD views that improvements in cross-border tax dispute resolutions would be treated as a high priority.


• The Government is expected to introduce relevant amendment bills by the end of 2017 or early 2018.


• The MLI is considered by the IRD as a high priority.

• In order to modify the current 35 comprehensive DTTs in a synchronized manner, Hong Kong is one of the 72 signatories to the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

• A bill was gazetted on 6 October 2017 to give effect to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MCAA) in Hong Kong. The Chief Executive in Council will be empowered to give effect to any tax arrangements made by Hong Kong with more than one jurisdiction as well as those made by Mainland China and apply the same to Hong Kong.

n/a



Country HungaryPKF member firm PKF Consulting Kft.

Your contact Vadkerti Krisztián





3 CFC’s

• Hungary has introduced CFC legislation. In Hungary, a foreign entity qualifies as a CFC if among the ultimate owners there are Hungarian tax resident private persons (in any proportion), or if the majority of the income of the entity is generated from Hungary, provided that, in both cases, the corporate income tax paid by the foreign entity does not reach the 9% threshold. The rule is not applicable to foreign entities which are resident in the EU or in a country with which Hungary has a DTT, provided that the entity has substantial activity in its country of registration.

• In order to apply CFC rules, equity should be held during the majority of the tax year.






59








11 BEPS data collection• CbCR obligations have been published on 15 May 2017. First CbCR must be submitted pertaining to financial

year 2016, within 12 months after the last day of financial year 2016. n/a




• A new decree of the Ministry of National Economy has been published on 18 October 2017. As from tax year 2018 TP documentation shall be introduced. In summary, the following information should be reported:

- The whole Group (both from a geographical, legal and business perspective); - Supply chain applied for the five most important products and services as well as for products and services

if their turnover exceeds 5% of the Group’s sales; - Financial and tax issues of the Group on a consolidated basis. - A brief description of the main transactions and value creation is also required. IPs and financial activities

are to be specified.

• The Local File contains information as usual. However, a detailed presentation of the connection between accounting records and TP-documentation shall be provided.

• Profitability of low value-added services shall be decreased by 3-7%.

• Provisions are optional for 2017.

n/a



• Hungary is one of the 72 signatories to the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a



Country IndiaPKF member firm PKF Sridhar & Santhanam Chennai India

Your contact S Hariharan



1 Digital economy• An Equalisation Levy of 6%, enacted with effect from 1 June 2016, is chargeable on the gross payment for

specified digital services and facilities, received or receivable by a non-resident who does not have a PE in India.n/a


3 CFC’s• The rules of residence were already changed to vest residency in India for foreign companies whose Place of

Effective Management (POEM) is in India. These rules have been made applicable from financial year beginning on 1 April 2016. Final guidelines to determine the POEM were issued in January 2017.

n/a

4 Interest deductions• Thin capitalisation rules introduced. Interest to associated enterprises allowable only to the extent other interest

payments fall short of 30% of EBITDA from 1 April 2017.n/a


• GAAR have been enacted and would be enforced from financial years beginning on 1 April 2017.

• To ensure nexus approach between income arising from exploitation of IP and expenditure incurred for substantial Research & Development, royalty income earned by Indian resident patentee from a royalty developed and registered in India is taxable at a beneficial rate.

n/a

6 Prevent treaty abuse• GAAR should address this.

• In addition to GAAR India has amended its DTTs with Mauritius and Cyprus to prevent abuse of the DTT. India’s DTT with Singapore is also impacted as the same linked with Mauritius DTT.

n/a

61




7 PE status • This is governed by tax treaty rules. n/a

8 TP - intangibles• TP provisions are used to deal with this.

• Master file requirements will address this. n/a





11 BEPS data collection• Transactions between related parties are required to be certified as being at arm’s length. CbC reporting

provisions have been implemented from financial year beginning on 1 April 2016. The exchange of information clause in the DTTs is available.

n/a




• TP documentation is mandatory for all persons having transactions with associated enterprises. CbC reporting implemented with effect from April 2016. A three-tier approach to documentation has been implemented:

- Master File; - Local File; - CbC Reporting.

• Guidelines relating to Master File and CbC Reporting were notified in October 2017.

n/a

14 Dispute resolution • Recourse available such as Advance rulings, APAs, Safe Harbour rules, Dispute Resolution Panel and MAP. n/a


• India is one of the 72 signatories to the MLI. The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a



Country IrelandPKF member firm PKF FPM

Your contact Paddy Harty



1 Digital economy

• The European commission’s work on the VAT system in Europe is progressing in tandem with the BEPS Project, e.g. the introduction of the MOSS scheme applies the destination principle of taxation. Since 1 January 2015 Ireland has treated the place of consumption as the place where VAT arises. Ireland has implemented the VAT MOSS scheme for digital supplies as per EU VAT Directive.

• Ireland will continue to follow the European commission proposals with regard to VAT and applying the destination principle to taxation of digital services.

2 Hybrids

• No specific action taken yet other than to note that hybrids are mainly used for genuine reasons, such as regulatory requirements or funding structures however where such structures are used to gain a tax advantage and to supports the work undertaken in relation to hybrids. Ireland is keen to ensure that any proposals do not result in unintended consequences that have a detrimental commercial effect in which case it will make its position known through commentary on any such proposed new rules.

• Ireland will continue to follow and comply with international developments on hybrids.

3 CFC’s• Currently, Ireland has no CFC legislation but by 31 December 2018 at the latest Ireland is required to

adopt these rules as an EU member state under the EU Anti-Tax Avoidance Directive (“EU ATAD”). Ireland currently taxes once monies are remitted.

• Ireland will continue to monitor requirements for CFC legislation.


• There is existing legislation regarding deductibility of interest, and it is noted that any further recommendations would need to be brought in line with other potential reforms. There are no thin capitalization rules in Ireland. EU ATAD does require interest restriction rules to be implemented where existing national rules are deemed to be not as effective as Action Point 4.

• Ireland already has significant legislation in place in this regard. However, if this is found to not be effective, Ireland may be required to introduce new legislation by 31 December 2018.

5 Harmful tax practices• Ireland is fully implementing OECD exchange of information requirements in respect of tax rulings as

agreed in BEPS Action 5. The Knowledge Development Box was introduced in Finance Act 2015 in a manner that fully complies with the international best practice agreed in BEPS Action 5.

n/a

63





• It appears Ireland has concerns over the wording of the specific model articles for inclusion as it could cause significant issues for smaller countries. The OECD has acknowledged these concerns and it has been agreed further work is needed in this area.

• Action 6 is due to be implemented towards the end of 2016, early 2017 by way of Action 15 which is concerned with the multilateral instrument. Having a PPT included in DTT’s is Ireland’s preferred option.

7 PE status• Finance (No 2) Act 2013 and Finance Act 2014 resulted in new Irish incorporated

companies having default Irish tax residence. In July 2016, Ireland agreed to adopt the European Commission’s Anti-Tax Avoidance Directive.

• As yet nothing concrete although Action 7 is due to be implemented towards the end of 2016, early 2017 by way of Action 15.

8 TP - intangibles

• Ireland’s regime is in line with arm’s length principle. The definition of intangibles has expanded and there have been significant changes governing which group company is entitled to the income from intangibles. Income on intangibles will be determined based on where the developing, enhancing, maintaining, protecting and exploiting activities are carried out.

• Patent Box/Knowledge Development Box introduced in Finance Act 2015.

• In May 2016, new TP rules were agreed at the OECD. Ireland is now considering what changes are needed to ensure that Ireland’s TP rules meet the standards set out in the OECD TP guidelines.


• Ireland’s Companies Act 2014 places greater responsibility on Directors over the tax compliance of certain companies. Ireland has agreed in July 2016 to adopt the European Commission’s Anti-Tax Avoidance Directive.

• In May 2016, new TP rules were agreed at the OECD. Ireland is now considering what changes are needed to ensure that Ireland’s TP rules meet the standards set out in the OECD TP guidelines.


• See Action Point 9. • See Action Point 9.


• Ireland has adopted a Mandatory Disclosure regime under which promoters and taxpayers must provide information to Revenue on certain transactions which give rise to a tax advantage. Irish Revenue has also signed up to a number of different international information sharing initiatives with the EU, OECD and US including the EU’s DAC on tax transparency.

• Irish Revenue is continuing to work on the implementation of DAC 3 dealing with exchange of information.


• Ireland has concluded TIEA with 25 Countries.• Ireland will continue to adopt best practice

approach as stipulated by OECD.





• CbC legislation was implemented in Finance Act 2015 and provides for mandatory reporting for multinationals as a result of the BEPS recommendations. Ireland signed a Multilateral Competent Authority Agreement in January 2016 to share these reports with other tax authorities. In 2015, Ireland adopted the Commission’s fourth AML Directive which provides for greater transparency on beneficial ownership of companies and trusts.

• On 23 June 2016 Revenue published FAQs on CbC reporting to clarify the requirements of Action 13. Some of the issues covered by the documents are (i) the interpretation of CbC reporting legislation, (ii) filing obligations, (iii) the appointment of surrogate parent entities, (iv) the information to be included in a report, (v) the secondary reporting mechanism and (vi) equivalent CbC reporting.

n/a


• Ireland’s bilateral APA program is effective from 1 July 2016 and applies to bilateral APA applications made to Revenue on or after this date. Therefore, the Revenue guidelines do not apply to: (i) Bilateral APAs signed before 1 July 2016; (ii) Formal bilateral APA applications that have been submitted to Revenue before 1 July 2016 (but in respect of which an APA has not been concluded as of 1 July 2016) and (iii) Unilateral APAs, i.e. agreements solely between the taxpayer and Revenue and not involving another competent authority.

• The program applies only to TP issues (including the attribution of profits to a PE) and is conducted within the legal framework of the DTT that Ireland has entered into with the other jurisdiction concerned. An application may be made by a company that is tax resident in Ireland for the purpose of the relevant treaty and also by a PE in Ireland of a non-resident company in accordance with the provisions of the relevant treaty. The bilateral APA program is intended to apply in respect of a transactions where the TP issues are complex, e.g. where there is significant doubt about the appropriate application of the arm’s-length principle or where there would otherwise be a high likelihood of double taxation.

• Where the TP issues involve more than two tax jurisdictions, of which Ireland is one, the Revenue will consider entering into a series of bilateral APAs. The bilateral APA program is voluntary: taxpayers can choose whether or not to enter into it.

• Action 14 is due to be implemented towards the end of 2016, early 2017 by way of Action 15 concerning multilateral instruments.


• Ireland is one of the 72signatories to the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a

On 11 October 2016, the MoF presented Budget 2017 and committed to meeting the best new international tax standards. A review of Ireland's CIT code was also announced and will include consideration of

what further actions Ireland may need to take to ensure it is fully compliant with the OECD BEPS recommendations. The Finance Bill was published on 20 October 2016 and the Finance Act is expected to be

published in late December / early January. The Finance Act will give legislative effect to changes announced in the Budget.

65



Country ItalyPKF member firm PKF MGP Studio Tributario e Societario

Your contact Marco Giuliani



1 Digital economy

• An amendment to a law decree introduced a “transitory web tax” applicable to multinationals with total revenues of more than EUR 1 billion per year and sales worth more than EUR 50 million in Italy. Despite the literal wording, such a tax is the outcome of an “assessment” procedure the aforementioned MNEs may opt for. In other words, MNEs may appraise with the Tax Agency the existence of a PE in Italy and consequently attribute to the PE the “proper” taxable income accordingly.

• The Italian tax authorities are taking a strict approach towards global technology companies doing business in Italy. The Italian government reiterated the promise to introduce, as soon as general consent will be found in the EU, a “digital tax” affecting online purchases of goods and services from not residents.

2 Hybrids

• Italian tax rules already prevent the mentioned effects under said mismatch arrangements.

• In July 2016, the Italian Tax Code has introduced an anti-avoidance provision whereby foreign hybrid instruments can be treated in Italy as debt/equity only if the relevant proceeds are fully/partially taxable in the foreign Jurisdiction (or the same proportion if the deduction is partial).

n/a

3 CFC’s

• According to the already in force Italian CFC rules, the profits realized by a non-resident company with tax residence in a tax haven country are taxable on accrual basis unless at least one of the two following exceptions are met: (i) the ultimate Italian shareholder is able to prove that the CFC “mainly and effectively” carries on an effective trading or industrial business in its country of tax residence (ii) the Italian shareholder can prove that the establishment of the CFC in the low-tax country was not tax-motivated.

• New definition of tax haven country for CFC purposes which applies to all jurisdictions (other than an EU or EEA country that has concluded an exchange of information agreement with Italy) having a nominal CIT rate lower than 50% of the Italian tax rate.

n/a





• Interest expenses are deductible up to an amount equal to interest income accrued in the same tax period. Any excess over that amount is deductible up to 30% of EBITDA of the company.

• There is no possibility to transfer the surplus of non-deductible interest expenses within an Italian fiscal unit for foreign companies which meet the requirements for the national consolidation.

• Italian relevant tax rules are already in line with those recommended by BEPS.


• On 24 April 2017, Italy’s Council of Ministers enacted a Law Decree which provides the exclusion of trademarks and logos from the patent box regime to align the rules with BEPS Action 5. This Decree is already in force although it must be converted into a final Law by the Italian Parliament within 60 days.

n/a


• Generally, in order to prevent abuse, the DTTs signed by Italy are applicable only if the recipient of the payment is the beneficial owner as defined by OECD guidelines.

• No specific provisions have been included yet to tackle the double tax exemption, which may arise under certain circumstances.

n/a

7 PE status• The definition of PE for Italian tax purposes follows in general terms the wording of article 5 of

the OECD Model Tax Convention.

• In all likelihood, the BEPS changes brought at EU level will be reflected in domestic tax legislation.

8 TP - intangibles

• On 24 April 2017, Italy’s Council of Ministers enacted a Law Decree which provides a change in the definition of the arm’s length principle for TP purposes and the introduction of new downward adjustment mechanisms to align the definition with article 9 of OECD Model. This Decree is already in force although it must be converted into a final Law by the Italian Parliament within 60 days.

n/a





11 BEPS data collection • As of 2016, a new mandatory documentation CbC Reporting will apply to MNEs.

• Detailed instructions on the CbC reporting data will be communicated by the Tax Authorities - expected to be published by end of 2016.

67





• No specific action taken yet. However, it is expected that this will be implemented as soon as results from initiative under action point 11 will be available.

n/a


• From 2010, taxpayers are required to keep TP documentation evidencing how the TP were set forth.

• If, during the TP audit, the taxpayer provides duly kept and accurate TP documentation as set forth by the Italian tax authorities, no penalty will be charged even in case of TP adjustments.

• As of 2016, a new mandatory documentation CbC Reporting will apply to MNEs.

• On March 2017, a decree specified requirements, deadlines and information needed for CbC Reporting in line with the guidelines provided by the EU Directive no. 2016/881.

n/a

14 Dispute resolution• Italy implemented the possibility to apply for MAP in order to amicably resolve disputes about double taxations

under DTT or TP rules.n/a


• Italy joined the FATCA and CRS agreements which are aimed to fight tax evasion through the AEOI between the countries.

• Italy is one of the 72 signatories to the MLI. The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a



Country JapanPKF member firm PKF HIBIKI Audit Corporation

Your contact Seiji Doko, Hironori Okada



1 Digital economy

• In accordance with the Act for Partial Revision of the Income Tax Act and Other Acts (Act No. 9 of 2015), the Consumption Tax Act was partially amended with the revision of consumption taxation on cross-border supplies of services such as digital content distribution.

• The criterion for determining either domestic or foreign transactions has been revised from the location of the office of the service provider associated with providing such services to address of the service recipients.

n/a

2 Hybrids• In accordance with 2015 tax reforms in Japan, foreign dividend exclusion rule was revised based

on the BEPS action plan. Purpose of this reform is avoidance of double non-taxation for dividends between countries.

n/a

3 CFC’s • In accordance with 2015 tax reforms in Japan, the CFC rule (Anti-Tax Haven rule) was revised.

• There is CFC regulation in Japan. Income earned by CFCs must be included in the taxable income of the Japan shareholder under certain circumstances.


• The following rules for interest deductions apply in Japan: (i) TP taxation; (ii) Thin capitalization rule: the thin capitalization rule will disallow deductions for the portion of gross interest to foreign shareholders applicable to debt which exceeds three times the amount of capital and (iii) Earnings stripping rule: the earnings stripping rules will disallow deductions for net interest payments to foreign related persons in excess of 50% of adjusted taxable income. If both the earnings stripping rules and the thin capitalization rules are applicable in a fiscal year, only the higher of the disallowed amounts will be applied.

n/a

69






• In accordance with 2015 tax reforms in Japan, special measures to impose income tax on unrealized capital gains on financial assets held by an individual at the time of departure from Japan were adopted.

• There are LoB rules or PPT rules in tax treaties with certain countries.

7 PE status• In accordance with 2014 tax reforms in Japan, the AOA

for attribution of profits to a PE was adopted.• PE is defined by tax law.

8 TP - intangibles • No specific action taken yet.

• Intangibles are defined by tax law.

• There are TP administrative guidelines for (i) intangible properties to consider in examinations; (ii) contribution to the formation, maintenance or development of intangible properties and (iii) cost contribution arrangement.




• No specific action taken yet.• There are TP administrative guidelines for (i) transaction for the licensing of

intangible property and (ii) treatment of intra-group services.





• In accordance with 2016 tax reforms outlined in Japan, TP documentation rules were introduced based on the BEPS action plan 13 regarding following issues:

- CbC Report; - Master file; - Local file.

• There are TP administrative guidelines for the following documentation: (i) documents that describe the capital relationship and details of business of the corporation and each foreign-related party, (ii) documents containing the details of foreign-related transactions and (iii) documents used by the corporation for the calculation of arm’s length prices.

• Documents used by the corporation for the calculation of arm’s length prices.




14 Dispute resolution • No specific action taken yet.

• Revised DTT with some countries includes treaty arbitration clauses.


• Signed “Convention on Mutual Administrative Assistance in Tax Matters” in November, 2011

• Japan is one of the 72 signatories of the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a

71



Country Jordan PKF member firm PKF Jordan

Your contact Mohammed Khattab



1 Digital economy • Noใ n/a

2 Hybrids

• Jordan signed several Treaties for the Avoidance of Double Taxation that contain provisions similar to what is mentioned here in the report. For the sake of reference we have chosen the Treaty between the Council of Arab Economic Unity States regarding Avoidance of Double Taxation and Prevention of Tax Evasion on Taxable Income and Capital as it is signed by several Arab countries and contains relevant provisions that cover this report.

• Article 9: “Associated Enterprises” explains the cases covered and exceptions.

n/a

3 CFC’s • Article 9: “Associated Enterprises”. n/a


• Article 11: “Interest” states that interest arising from investments of all types is subject to tax in the contracting state where these interests occur, and these interests might also be taxable in the state where the beneficiary resides.

• The article also provides a definition of the interests, their applicability and exceptionsใ.

n/a


• Article 9/4 excludes tax evasion cases from the provisions of items 2 and 3 of this article.

• Article 26/1 gives the contracting states the right to request interpretation of the Treaty’s provisions if it appeared that one of the other contracting states implemented or is currently implementing any provision incorrectly far from the goals and objectives relevant to the avoidance of double taxation and prevention of tax evasion.

n/a

6 Prevent treaty abuse• Article 25 of the Treaty: “Non- Discrimination” covers this point as it defines nationals whether natural persons

or legal entities, states when the nationals, PE and projects of any contracting state are excluded from tax in other contracting states.

n/a




7 PE status• Article 5: “Permanent Establishment” defines Permanent Establishments and states also when an establishment

is excluded from the PE status.n/a

8 TP - intangibles• This point is covered in articles 4: “Resident” which explains the resident status, Article 22: “Other Income”,

Article 23/4: “Tax on Capital” and Article 24: “Double Tax Avoidance Methods”.n/a


• This point is covered in articles 4: “Resident” which explains the resident status, Article 22: “Other Income”, Article 23/4: “Tax on Capital” and Article 24: “Double Tax Avoidance Methods”.

n/a


• This point is covered in articles 4: “Resident” which explains the resident status, Article 22: “Other Income”, Article 23/4: “Tax on Capital” and Article 24: “Double Tax Avoidance Methods”.

n/a

11 BEPS data collection • Article 27: “Exchange of Information”. n/a



13 TP – documentation• This point is covered in articles 4: “Resident” which explains the resident status, Article 22: “Other Income”,

Article 23/4: “Tax on Capital” and Article 24: “Double Tax Avoidance Methods”.n/a


• Article 26/1 gives the contracting states the right to request interpretation of the Treaty’s provisions if it appeared that one of the other contracting states implemented or is currently implementing any provision incorrectly far from the goals and objectives relevant to the avoidance of double taxation and prevention of tax evasion.

• The article also states the procedures in such a case and the competent bodies.

n/a

15 Multilateral instrument• The Treaty between the Council of Arab Economic Unity States regarding Avoidance of Double Taxation and

Prevention of Tax Evasion on Taxable Income and Capital.n/a

* Jordan signed several Treaties for the Avoidance of Double Taxation that contain provisions similar to what is mentioned here in the report. For the sake of reference we have chosen the Treaty between the Council of Arab Economic Unity States regarding Avoidance of Double Taxation and Prevention of Tax Evasion on Taxable Income and Capital as it is signed by several Arab countries and contains relevant provisions that cover this report.

73



Country KuwaitPKF member firm PKF Bouresli & Co.

Your contact Tariq M Bouresli



1 Digital economy• Kuwait has signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters Convention.

The Convention will enable Kuwait to fulfil its commitment to begin the first of such exchanges by 2018. n/a

2 Hybrids • Kuwait does not have the proposed legislation. n/a

3 CFC’s • Kuwait does not have the proposed legislation. n/a

4 Interest deductions • Kuwait IT Law limits the deductibility of interest in certain cases. n/a

5 Harmful tax practices • Kuwait does not have any preferential tax regimes. n/a


7 PE status

• Kuwait’s Department of Inspections and Tax Claims (DIT) has recently changed its approach as to the interpretation of the permanent establishment (PE) concept with respect to services rendered by non-residents in Kuwait. The DIT has introduced the concept of a “Virtual Service PE,” pursuant to which, when determining whether the period when services are rendered by a non-resident exceeds the (usually 183-day) threshold provided in a tax treaty, no consideration is to be given to the physical presence of employees or contractors of the service provider for establishing the nexus. Thus, a service PE may be created even if employees of the service provider are not present there and perform their activities entirely offshore. This may result in the denial of income tax relief claimed by non-residents under the applicable double tax treaties of Kuwait. Although the

n/a




7 PE status (Continued)

new approach adopted by the DIT has not been officially announced, in several recent cases, the DIT has denied use of the OECD interpretation of PE clauses in double tax treaties and has subjected non-resident companies to domestic taxation on the basis of the “Virtual Service PE” concept. The draft IT Law for introducing Business Profit Tax in Kuwait was submitted by the Kuwait MOF to Parliament for discussion and approval. The draft law includes provisions which signal the intent of the MOF to align with the global community to address BEPS, focusing on artificial avoidance of PE status as well as addressing tax arbitrage gained through the use of harmful tax practices.

8 TP - intangibles • Kuwait IT Law regulates the transfer pricing between associated enterprises. n/a





11 BEPS data collection• Kuwait signed the multilateral convention on mutual administrative assistance in tax matters. This will enable

Kuwait to fulfil its commitment to begin the first of such exchanges by 2018.n/a






• Kuwait is one of the 72 signatories to the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a

75



Country LatviaPKF member firm PKF Latvia SIA

Your contact Maruta Zorgenfreija






4 Interest deductions• No specific action taken yet recently. However, Latvia has existing general thin capitalisation rules: interest

deductions are restricted based on two criteria: interest rate applied to average interest-bearing liabilities and debt-to-equity ratio.

n/a















13 TP – documentation • No specific action taken yet.

• The MoF has prepared amendments to the Law on Taxes and Duties which is in line with the EU Directive on AEOI in the field of taxation and also corresponds to BEPS Action point 13. It is proposed to require taxpayers to file an MNE group’s CbC report with the State Revenue Service.



• Latvia is one of the 72 signatories to the MLI. The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a

77



Country LibyaPKF member firm PKF Exclusive Correspondent - Libya

Your contact Tarek Brigh





3 CFC’s• There is no specific CFC legislation in Libya, but in general, for foreign source income, the Tax Authorities levy

taxes on resident companies on all profits arising from foreign sources in the same way as income from local sources except for income raised for persons as salaries.

n/a

4 Interest deductions• An interest-free loan was introduced after the 2013 Islamic Banking Law came into effect on 1 January 2015,

prepared under the National Transitional Council and approved by the General National Congress.n/a







8 TP - intangibles • Transferring Intangibles is not common under the Libyan tax system, No specific action taken yet. n/a





11 BEPS data collection• Transferring funds overseas between domestic and foreign branches is scrutinised more by central Libyan bank

regulations.

• No other specific action taken yet.

n/a


• Foreign and domestic companies that are registered in Libya are obliged to submit their tax return every year even if they freeze or suspend operations in the country (even under force majeure).

• No other specific action taken yet.

n/a

13 TP – documentation • See action point 12. n/a

14 Dispute resolution• In case of disagreement between domestic and foreign institutions Libyan law is mostly used. However, several

country to country agreements are used to resolve treaty- related disputes.n/a

15 Multilateral instrument• Libya is not a signatory to the MLI.

• No specific action taken yet.n/a

79



Country LuxembourgPKF member firm Alliance Révision

Your contact Rui Da Costa




2 Hybrids• Luxembourg implemented in 2015 the July 2014 amendment of the EU PSD disallowing the benefits

of the Directive (in essence participation exemption relief) if the “dividend income” gave rise to a “tax deduction” in the source country.

• Like all EU member states, Luxembourg will be required to implement the regulations of the EU ATAD I and ATAD II on hybrid mismatches into Luxembourg income tax law within the required timeframe.

3 CFC’s • No specific action taken yet. There are no CFC rules in Luxembourg.

• Like all EU member states, Luxembourg will be required to implement the regulations of the EU ATAD I and ATAD II on CFC rules into Luxembourg income tax law within the required timeframe.






• The IP regime is abolished with effect as of 1 July 2016. The existing IP regime will, however, remain available during a transitional period which ends on 30 June 2021 for: (i) Qualifying IP rights which have entered the IP regime before 1 January 2016, and; (ii) Qualifying IP rights which have been acquired during the period from 1 January 2016 till 30 June 2016 to the extent that the qualifying IP rights have been acquired from unrelated parties, or if they are acquired from related parties, the IP rights benefitted upon their acquisition from the Luxembourg IP regime or from a similar foreign IP regime and (iii) Qualifying IP rights that are acquired from related parties between 31 December 2015 and 1 July 2016 and that did not benefit from the Luxembourg IP regime or a similar foreign IP regime, the benefits provided for by the IP regime will only be available for 2016 income tax and 2017 net worth tax.

• Moreover, the Luxembourg tax authorities spontaneously inform competent foreign tax authorities about the persons benefitting from the Luxembourg IP regime in relation to qualifying IP acquired or constituted on or after 6 February 2015.

• The advance tax ruling process has been formalized as of the tax year 2015 and advance tax rulings are reviewed by a ruling commission.

• As of 1 January 2017, Luxembourg will automatically exchange all advance tax rulings and unilateral APAs covering cross-border transactions or situations, as well as under certain conditions, advance tax rulings and unilateral APAs covering cross-border transactions or situations that were issued, amended or renewed by the Luxembourg tax authorities between 1 January 2010 and 31 December 2016.

n/a



8 TP - intangibles

• The advance tax ruling process has been formalized as of the tax year 2015 and advance tax rulings are reviewed by a ruling commission.

• As of 1 January 2017, Luxembourg will automatically exchange all advance tax rulings and unilateral APAs covering cross-border transactions or situations, as well as under certain conditions, advance tax rulings and unilateral APAs covering cross-border transactions or situations that were issued, amended or renewed by the Luxembourg tax authorities between 1 January 2010 and 31 December 2016.

• With effect as of 1 January 2017, Luxembourg has introduced new legislation clarifying that the arm’s length remuneration between related parties is to be determined based on the key principles included in the OECD TP Guidelines, as revised by the actions n° 8-10 of the OECD BEPS action plan.

n/a

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• With effect as from 1 January 2017, Luxembourg has introduced new legislation clarifying that the arm’s length remuneration between related parties is to be determined based on the key principles included in the OECD TP Guidelines, as revised by the actions n° 8-10 of the OECD BEPS action plan.

• By the end of December 2016, the Luxembourg tax authorities issued new guidance on the determination of arm’s length remuneration for intra-group financing transactions. The main differences compared to previous guidance issued are that:

- The equity required to carry out the activity needs to be determined based on the equity at risk taking into account all facts and circumstances; previous safe haven rules (i.e. equity of 1% with a max. of EUR 2 million) have been abolished;

- Unilateral APAs granted based on previous guidance will not be applicable anymore; - In principle, the arm’s length remuneration needs to be determined based on a TP analysis, except if the

functions and risk profile of the Luxembourg entity is comparable to functions and risk profile of certain regulated activities.

n/a


• With effect as from 1 January 2017, Luxembourg has introduced new legislation clarifying that the arm’s length remuneration between related parties is to be determined based on the on the key principles included in the OCED Transfer Pricing Guidelines, as revised by actions n° 8-10 of the OECD BEPS action plan.

n/a


• Luxembourg tax authorities spontaneously inform competent foreign tax authorities about the persons benefitting from the Luxembourg IP regime in relation to qualifying IP acquired or constituted on or after 6 February 2015.

• As from 1 January 2017, Luxembourg will automatically exchange all advance tax rulings and unilateral APAs covering cross-border transactions or situations, as well as under certain conditions, advance tax rulings and unilateral APAs covering cross-border transactions or situations that were issued, amended or renewed by the Luxembourg tax authorities between 1 January 2010 and 31 December 2016.

n/a







• On 23 December 2016, Luxembourg has introduced CbC Reporting by transposing the EU Directive 2016/881. CbCR will be applicable for the first time for tax years ending on 31 December 2016. Thus, Luxembourg companies that are part of a multinational group that realizes consolidated revenues of at least EUR 750 million (or an equivalent amount in a currency other than EUR) have to notify the Luxembourg tax authorities whether they are the parent entity of the multinational group, the surrogate parent entity, an EU constituent entity or a non-reporting constituent entity. Notifications should have been done until 31 December 2016. As the CbCR regulations have been introduced shortly before calendar year end, the deadline for the notification to the tax authorities has been extended until 31 March 2017. For following fiscal years, notification must be done before the end of the reportable fiscal year.

• Finally, if the Luxembourg entity is the parent entity, the surrogate parent entity or the constituent reporting entity, it will in addition to the notification to the tax administration also be required to file a CbC report in line with the requirements of the EU Directive 206/881 within 12 months after the end of the fiscal year covered by the CbC report.

• Companies that do not comply with the CbCR regulations may be imposed fines up to EUR 250,000.

n/a



• Luxembourg is one of the 72 signatories of the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a

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Country MacedoniaPKF member firm Effect plus

Your contact Nikolaki Miov, Kristina Tilik





3 CFC’s • No specific action taken yet. See * below

4 Interest deductions • No specific action taken yet. See * below












11 BEPS data collection • No specific action taken yet. See * below






* After two years Macedonia has a new Government since June 2017. The BEPS action plan is considered to be a part of the government platform..

85



Country MaltaPKF member firm PKF Malta

Your contact Donna Greaves




2 Hybrids

• In 2015, an amendment has been effected to the applicability of the participation exemption on dividends derived from a participating holding in order to implement the provisions of article 1(1) of EU Directive 2014/86/EU. The participation exemption applicable to dividends derived from a participating holding will continue to apply. However, where such profits benefit from the exemption from WHT set out in article 5 of EU Directive 2011/96/EU, the participation exemption would only apply to the extent that such profits are not deductible by the relevant subsidiary distributing the dividend in that other EU Member State. The same applies to a PE situated in Malta of a parent that is established in another EU Member State.

• Malta agreed to Anti-Avoidance Directive 1, rules addressing hybrid mismatches have also been included, whereby it is stated that deduction shall be given only in the Member State where such payment has its source.

• Malta agreed to the ATAD II proposal, aimed at combating hybrid mismatches with regard to non-EU countries, given that intra-EU hybrid mismatches are already addressed by ATAD 1.

• Limitation of the scope: a carve-out for hybrid regulatory capital (limited in time until 31 December 2022) and financial traders; and

• Date of implementation: a longer timeline for coming into force as of 1 January 2020 (with certain exceptions for reverse hybrid mismatches rules that must come into force as of 1 January 2022).




3 CFC’s • No specific action taken yet.

• Malta agreed to the Anti-Avoidance Directive 1, Through a CFC Rule, Member States can treat an entity or a PE as a CFC, and thus have the right to tax such profits as per domestic tax rules. These rules apply where the following conditions are met: (i) the tax payer or together with their associated enterprises hold a direct or indirect participation of more than 50% of the voting rights, capital, or right to profit distribution; and (ii) the actual corporate tax paid on the profits of an entity or a PE is lower than the difference between the corporate tax that would have been charged on the entity or PE under the domestic tax system and the actual tax paid on its profits by the PE or entity. Member states may apply certain carve outs, such as cases of substantive economic activity and certain de minimis cases.


• No specific action, however as a general rule, in ascertaining profits shall be deducted all outgoings and expenses incurred to the extent they were wholly and exclusively incurred in the production of the income, including (a) sums payable by such person by way of interest upon any money borrowed by him, where the Commissioner is satisfied that the interest was payable on capital employed in acquiring the income.

• Malta agreed to ATAD I, where by 2018 has to implement the interest limitation rule. The Interest Limitation Rule limits the borrowing costs to 30% of EBIDTA. However, by way of derogation, a taxpayer may be given the right to deduct exceeding borrowing costs up to a threshold of EUR 3 million or to fully deduct exceeding borrowing costs if the taxpayer is a standalone entity. Under this rule, Member States also have the following options: (i) new loans or those loans used to fund long term public infrastructure within the EU may be excluded from this rule; (ii) to allow taxpayers to deduct in full or in part exceeding borrowing costs subject to the satisfaction of group gearing ratio conditions; (iii) to carry forward or backwards exceeding borrowing costs; and (iv) to exclude financial undertakings from the scope of this rule.


• In Malta, there is no preferential IP-regime.

• Malta has procedures to facilitate the exchange information on direct tax issues.

• Malta has anti-abuse provisions in place to combat harmful tax practices, where any scheme which reduces the amount of tax payable by any person is artificial or fictitious or is in fact not given effect to, the Commissioner shall disregard the scheme and the person concerned shall be assessable accordingly.

• Malta agreed to ATAD 1, where by 2018 through a GAAR, Member States have the right to ignore any arrangements which have been put into place for the main purpose of obtaining a tax advantage that defeats the objects of the applicable tax law and are not genuine.

87




6 Prevent treaty abuse • Some DTTs with Malta comprise a GAAR rule while others contain a specific LoB rule. n/a













• Malta is one of the 72 signatories of the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a



Country MauritiusPKF member firm PKF (Mauritius)

Your contact Christine Sek Sum





3 CFC’s • No specific action taken yet. There is no CFC legislation in Mauritius. n/a





89












13 TP – documentation• No specific action taken yet. There is no TP legislation in Mauritius, although there is a requirement in the

Income Tax legislation for transactions to be at arm’s length.n/a



• On 5 July 2017, Mauritius signed the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). It submitted a provisional list of reservations and notifications in respect of the various provisions of the MLI. Out of 42 DTTs that Mauritius has concluded to date, 23 have been identified as Covered Tax Agreements.

• Mauritius indicated its commitment to revise the remaining 19 DTTs on a bilateral basis to ensure that they comply with BEPS minimum standards.






3 CFC’s

• Mexico adopted the non-deductibility criterion when a payment is made to a foreign entity that is controlled or controlled by the taxpayer; that the payment is made for interest, royalties or technical assistance and that the payment is considered non-existent for tax purposes in the country or territory where the foreign entity is located and that the foreign entity does not consider the payment as taxable income according to the tax provisions that are applicable to you (article 28, section XXXI, subsections a, b and c of the Law on Income Tax).

n/a

4 Interest deductions• Mexico adopted the criterion of not granting deductibility to the payment of interest deriving from the amount of

the taxpayer's debts that exceed three times its stockholders' equity arising from debts contracted with related parties residing abroad (Article 28, section XXIII of the Law on Income Tax).

n/a



Country Mexico PKF member firm PKF México



91





8 TP - intangibles• The aspects related to intangibles are considered in the annual informative statement corresponding to the

local file.n/a








13 TP – documentation• Mexico established the obligation to submit annual informative declarations on the master, local and country

archives by country (article 76-A of the Law on Income Tax).n/a



• México is one of the 72 signatories of the MLI. The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a



Country MoroccoPKF member firm PKF Maroc

Your contact Abdellatif Zarkal







• Interest accrued or invoiced by third parties or by accredited organization as a payment for credit or borrowing is tax deductible.

• Limitation is applied for deductibility of interest rate regarding associate current account. Thus, the amount should neither exceed company’s share capital nor the said interest rate which is set yearly by the Ministry of Finance. For reference, the deductible interest rate is set at 2.21% in 2017.

n/a



7 PE status• PE was dealt with in Circular No 717 (issued in April 2011). Hence, the PE status varies depending on the

company’s legal status (e.g. Liaison Office vs Coordination Centre) as well as on the existence or not of DTT.n/a

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8 TP - intangibles

• Morocco adheres to the arm’s length principle and broadly accepts references to the OECD Guidelines. In particular, all intercompany transactions must be conducted at arm's length.

• APA procedure was introduced in January 2015 in Moroccan Tax Code. Typically, an APA can take up to 12 months to conclude and is normally for a term of four years. The Tax Authorities cannot challenge the TP method agreed under an APA.

n/a




• The APA (Refer to Action Point 8) was introduced to avoid any misinterpretation of TP applied regarding intercompany transactions.

n/a

11 BEPS data collection• The DTT concluded between Morocco and other countries stipulates the possibility of exchanging information

of their taxpayers between the tax authorities within the framework of preserving both parties’ interests.n/a



13 TP – documentation• No specific action taken yet other than application of arm’s length principle on related party transactions as

well as introducing the APA as highlighted in the content of Action Point 8. n/a

14 Dispute resolution• In DTTs concluded with many countries such as Croatia, Finland, Turkey, UK, USA, and Vietnam…etc., an

amicable dispute resolution mechanism is included.n/a

15 Multilateral instrument• On 21 May 2013, Morocco has signed the Convention on Mutual Administrative Assistance in Tax Matters (not

yet ratified). It aims to combat tax avoidance through cooperation that ranges from exchange of information, including automatic exchanges, to the recovery of foreign tax claims.

• Domestic procedures must be completed for the ratification of the said Convention.



Country NepalPKF member firm T R Upadhya & Co.

Your contact Shashi Satyal



1 Digital economy• Central Billing Monitoring System (CBMS) is under trial run for the purpose of monitoring VAT invoices issued

digitally by taxpayers using their software. This will assist in monitoring taxable transactions on a real time basis.n/a


3 CFC’s

• Nepal has CFC provisions which tax the income earned by foreign entities controlled by Nepalese resident persons. A CFC is an entity not residing in Nepal, in which a resident person holds an interest and controls or may benefit from 50% or more of the rights to income, capital or voting power alone or with not more than four other residents.

• A CFC should distribute dividends to its beneficiaries in accordance with the beneficiaries' rights. This dividend is taxable as income of the beneficiary. Other dividends distributed by a CFC are exempt from tax.

n/a


• Interest is deductible if incurred in the course of conducting a business or investment. This is the case if the borrowed funds, for which interest is paid, are used in that production or used to acquire an asset used in that production. The deductibility of interest paid by resident entities to controlling entities is limited. Controlling entities are organizations or persons, which are tax exempt, or non-resident persons, or associates of exempt organizations, or non-resident persons that own or control at least 25% of the resident entity.

• Where interest is paid to a controlling entity the deduction must not exceed the sum of all interest that is to be included in the entity’s taxable income plus 50% of the entity’s taxable income (taxable income is calculated without including any interest income derived by the entity and not deducting interest expenses).

• Any interest for which a deduction is denied may be carried forward and treated as incurred during the next income year.

n/a


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7 PE status

• Specific criteria are set to recognize any entity as PE under section 2 of ITA. PE means a place from where a person fully or partially conducts his business. The term also includes place of fully or partially conducting business through agents (other than independent agents), place where main equipment or machinery is kept or installed or used, places where a person has provided any technical, professional, or consultancy service through his employees or otherwise for more than 90 days (at once or severally) in a 12 months period and a place where a person is engaged in a construction, assembly, or establishment project for 90 days or more, and the place of supervision of such project.

n/a

8 TP - intangibles• Briefly mentioned in the ITA which shall be as per internationally recognized TP rules where cross border

trading and financial transactions between affiliated entities have to be conducted in arm’s length transaction. No specific action plan to prepare detailed TP guidelines.

n/a


• Briefly mentioned in the ITA which shall be as per internationally recognized TP rules where cross border trading and financial transactions between affiliated entities have to be conducted in arm’s length transaction. No specific action plan to prepare detailed TP guidelines.

n/a


• Briefly mentioned in the ITA which shall be as per internationally recognized TP rules where cross border trading and financial transactions between affiliated entities have to be conducted in arm’s length transaction. No specific action plan to prepare detailed TP guidelines.

n/a









Country NetherlandsPKF member firm PKF Wallast

Your contact Ruud van der Linde and Jeroen van Strien




2 Hybrids

• The Netherlands implemented the July 2014 amendment of the EU PSD effectively from 1 January 2016 disallowing the benefits of the Directive (in essence participation exemption relief) if the “dividend income” gave rise to a “tax deduction” in the source country.

• On 29 May 2017, the EU Member States reached agreement on the amendment of the original ATAD. The new/amended Directive (ATAD 2) includes the coverage of hybrid mismatches, also between EU-member states and non-member states.

• The implementation in domestic law has to take place before 31 December 2019. For reverse hybrids implementation is due 31 December 2021.

• An internet consultation for the implementation legislation for ATAD2 will follow.

3 CFC’s • No specific action taken yet.

• The implementation of the EU ATAD, which includes additional CFC legislation requirements, is required before 1 January 2019.

• In July 2017 the Dutch Ministry of Finance published an internet consultation on the implementation of ATAD1. Among other things this draft legislative proposal includes a proposal regarding CFC legislation. The consultation phase has ended. We expect a draft bill regarding the implementation of ATAD 1 in the first quarter of 2018.

4 Interest deductions • No specific action taken yet.

• The implementation of the EU ATAD, which includes additional measures to restrict interest deductions, is required before 1 January 2019.

• A transition period may apply. The transition period will end by 31 December 2023.

• It is not clear to which extent the current targeted rules relating to the deduction of interest expenses will be withdrawn. Furthermore, it is not clear whether or not a transition period will apply.

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4 Interest deductions (Continued)

• In July 2017 the Dutch Ministry of Finance published an internet consultation on the implementation of ATAD1. Among other things this draft legislative proposal includes a proposal regarding earning stripping (limitation of interest deduction by way of an EBITDA-rule). The consultation phase has ended. We expect a draft bill regarding the implementation of ATAD 1 in the first quarter of 2018.

• In the coalition agreement (of 10 October 2017) the newly formed Dutch government lifts a corner of the veil with respect to the earning stripping rule. Although the coalition agreement is not a formal bill, we expect that in a formal bill the government will implement the EBITDA-restriction with a safe harbour threshold of EUR 1 million (instead of the maximum of EUR 3 million and no exemption for situations in which the taxpayer is better capitalised than the ultimate parent company.


• As of 2017, the access to the innovation box regime will be limited to patented IP and certain software only. Small caps (member of a group with < EUR 50 million revenue) will, within certain limits, remain permitted to apply the innovation box also with regard to non-patented (but otherwise qualifying) R&D. In addition, the nexus approach will be implemented meaning that the tax advantage will be limited to IP which is sufficiently developed in The Netherlands only.

• The EU Directive on the Automatic Exchange Of Information (AEOI) between EU Member States has been implemented with effect as from 1 January 2017.

• On 2 June 2017 the Dutch Government published a bill to implement EU Directive 2016/881 of 25 May 2016, amending Directive 2011/16/EU regarding mandatory automatic exchange of information in the field of taxation. Among other things the bill introduces penalties for group companies residing in the Netherlands in relation to certain failures to correctly or timely submit a CbC-file.

n/a




6 Prevent treaty abuse• No specific action taken yet.

• The new tax treaty between Ghana and the Netherlands provides for a PPT.

• The Dutch government has announced to welcome specific anti-abuse measures in new DTT negotiations.

7 PE status • No specific action taken yet.• The Dutch government has announced to

welcome the enhanced definition of PE in new DTT negotiations.

8 TP - intangibles • Implemented in the Dutch TP Decree. n/a


• Implemented in the Dutch TP Decree. n/a


• Implemented in the Dutch TP Decree. n/a





• The Netherlands implemented additional TP documentation requirements as of 1 January 2016, including CbC-reporting requirements for large caps (member of a group with > EUR 750 million revenue) and minimum standards as regards TP documentation (master file, country file) for mid-caps (member of a group with > EUR 50 million revenue) and large caps.

• The proposition of the Tax Plan 2018 by the Dutch Ministry of Finance contains – among other things – a proposal to explicitly allow ‘voluntary filing’ (also known as ‘parent surrogate filing’) from countries that did not (yet) implement CbC-reporting. The proposal is expected to enter into force on 1 January 2018.

99




14 Dispute resolution • No specific action taken yet.

• The Dutch State Secretary of Finance has the intention to implement the proposed measures for dispute resolution in tax treaties via the MLI. However, regarding mandatory and binding arbitration – and as far as a Covered Tax Agreement already contains an existing provision in such a regard – The Netherlands intends to make a limited reservation.


• The Netherlands is one of the 72 signatories to the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

• The Dutch State Secretary of Finance has the intention to implement the proposed measures for dispute resolution in tax treaties via the MLI. However, regarding mandatory and binding arbitration – and as far as a Covered Tax Agreement already contains an existing provision in such a regard –, The Netherlands intends to make a limited reservation.



Country New ZealandPKF member firm PKF Bredin McCormack Rewcastle Limited

Your contact Jono Bredin










101















* The New Zealand government has made some BEPS proposals to implement the OECD BEPS action points into domestic law. However, as New Zealand is undergoing a change of government, the BEPS proposals are currently unlegislated and may change.



Country PakistanPKF member firm PKF FRANTS Chartered Accountants

Your contact Faheem Abdul rauf



1 Digital economy

• Digital market places, i.e. an information technology platform run by an e-commerce entity over an electronic network that acts as a facilitator in transactions that occur between a buyer and seller, will be subject to a reduced rate of withholding/collection tax at 5% on their commission income( as against a general tax rate of 12%) and the tax shall be the final tax for such entities. The minimum turnover tax rate under section 113 on commission income at 0.5% (general rate for other entities 1.25%) is also applicable to commission earned from Principals that are not prescribed withholding agents under section 233.

n/a


3 CFC’s• No specific action taken yet. However, under Section 109 of Income Tax Ordinance 2001, the Commissioner has

power to re-characterise income and deductions.n/a

4 Interest deductions• The existing rules for thin capitalisation are provided in Section 106 of Income tax Ordinance under section 106,

whereby profit on debt is disallowed for debt-to-equity ratio exceeding 3:1.n/a


• No specific action taken. However, Benami Transactions (Prohibition) Act, 2016 was enacted in January 2017 that prohibits certain types of financial transactions. Specific anti avoidance rules apply for salary paid by private companies, unexplained income or assets, security transactions, payment of royalty, management fee, interest by permanent establishment to head office or another permanent establishment of head office (except reimbursements).

n/a


• China and-Pakistan signed Third Protocol to the Avoidance of Double Taxation in December 2016. Furthermore, Pakistan and Switzerland revised the agreement for Double Tax Avoidance and information sharing. On a multilateral level, membership of OECD enables Pakistan to receive and send information on tax data from and to 100 countries, fully activated in the year 2018-19.

n/a

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7 PE status

• This is governed by DTT Rules in Pakistan.

• Liaison Office is excluded from PE status but detail was not available previously in Income Tax Ordinance as to what constitutes a Liaison Office. Now a comprehensive definition is added under section 2(30C) of above said Ordinance.

n/a

8 TP - intangibles • TP Provisions are used to deal with it. n/a


• No specific action taken yet. However, the Tax Authorities can use CbC reports to analyse transactions. n/a


• No specific action taken yet. However, the Tax Authorities can use CBC reports to analyse transactions. n/a

11 BEPS data collection• Transactions between related parties are required to be certified as being at arm’s length. CBC reporting

provisions have been implemented with effect from 1 July, 2016. The exchange of information clause in the DTTs is available.

n/a




• Pakistan has already made public via its SRO 421(1)/2017 on 5 June 2017 a three-tier documentation approach detailed in Action 13 which includes CbC Reporting requirements.

• The State Bank of Pakistan (SBP) and Customs Department of the Federal Board of Revenue (FBR) signed a Memorandum of Understanding (MoU) for issuing electronic forms for imports to curb the risk of under-invoicing and TP. The use of E-Form will curb the risk of under-invoicing and transfer pricing in addition to integrating the foreign exchange accounting system of the SBP with Customs clearances.

n/a

14 Dispute resolution • Dispute resolution panel and MAP are available. n/a

15 Multilateral instrument• Pakistan signed OECD’s Multilateral Convention on Mutual Administrative Assistance in Tax Matters on 14

September, 2016 (effective 1 April 2017) and Multilateral Competent Authority Agreement on Automatic Exchange of Financial Accounts (MCAA) in June 2017.

n/a



Country PolandPKF member firm PKF Consult Spółka z ograniczoną odpowiedzialnością Sp.k.

Your contact Agnieszka Chamera




2 Hybrids

• Dividends received from another Polish company, an EU/EEA or a Swiss company are exempt from taxation if certain holding and participation requirements are met (the EC PSD).

• According to a new regulation since 1 January 2016 the provisions concerning the tax exemption on dividend payment do not apply if:

- Receipt of dividends occurs in connection with the transactions or activities, which are not real (actual), meaning that arrangements have been introduced to obtain a tax advantage only;

- And these transactions have been put into place without reflecting economic reality.

n/a

3 CFC’s

• Since 1 January 2015 Polish taxpayers are subject to Polish tax on income earned by their CFCs even if the income is not distributed by the non-Polish company. The tax rate for such income is 19%.

• A CFC is defined as:

- A foreign company having residence in a tax heaven; or - A foreign company having residence in a state, with whom the Republic of Poland or EU has not concluded

the international TIEA; or - A foreign company: (i) in which the Polish resident has at least 25% of the shares or 25% of the voting rights

or 25% of the shares related to the right to participation in profits; (ii) in which at least 50% of income is of the passive nature (financial), i.e. dividends, capital gains, interest, royalties; (iii) in which at least one type of passive income is subject to tax at a rate lower by 25% than the Polish CIT (which gives a rate of 14,25% limit) or tax exempt (with the exception of exemptions under EU PSD.

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105





• New thin capitalisation rules were introduced and became effective from 1 January 2015 and apply not only to loans between direct related parties (“mother” company to “daughter” company) but also to transactions between indirect related parties, i.e. parties which possess indirectly no less than 25% of share capital of taxpayer or of share capital of lender.

• The new thin capitalisation ratio is 1:1, but the subject to verification is a total value of debt to the related parties to the value of equity (not only to the shareholder capital).

• The term “total value of debt to the related parties” does not only include the value of loan, but also other debts (for example from trade transaction).

• The CIT Act allows a taxpayer to use an alternative method to determine the limit on tax-deductible interests. According to the alternative method, deductible interests may not exceed the value of the taxpayer assets multiplied by the reference published by Poland Central Bank. If a taxpayer decides to use the alternative method, it must be used for both related party and third party loans for at least 3 tax years.

n/a



• Part of double avoidance agreements taxation has been changed over last years to:

- Eliminate the specified tax planning possibilities or - Introduce the mechanisms of making tax avoidance impossible (e.g. contract with Luxembourg, Cyprus,

Malta, Singapore),

• Poland has concluded 14 TIEAs, including the so-called tax havens.

n/a

7 PE status• The increase in the number of tax audits of foreign companies conducting business activity in Poland through

the PE in the scope of fulfilling the tax obligation of PE in Poland and the principles of determining the tax income of PE and making financial settlements between foreign company and their PE in Poland.

n/a

8 TP - intangibles • Polish TP rules generally meet the 2010 OECD TP Guidelines. n/a


• Polish TP rules generally meet the 2010 OECD TP Guidelines. n/a


• Polish TP rules generally meet the 2010 OECD TP Guidelines. n/a






• The anti-tax avoidance clause exists since July 2016 in the Polish tax regime. The purpose of this clause is to prevent fictitious transactions that taxpayers carry out primarily to achieve tax advantages. Practically speaking, this means transactions which are hardly justifiable from an economic or business point of view. The Tax Ordinance Act, which includes this regulation, also defines what a tax advantage means, namely avoidance, deferral or reduction of a tax liability; creation or overstatement of a tax loss; creation or overstatement of a tax overpayment or a reclaimed amount.

• The legislation sets a threshold of PLN 100,000 which, if exceeded, entitles the tax authorities to invoke the anti-tax avoidance clause. According to the Amending Act the anti-tax avoidance clause is also applicable to tax consequences arising after its entry into force even if the transactions that brought about those consequences took place before the clause's effective date.

• The MoF in Poland has begun to publish a series of news/statements containing cautions about the possibility of applying a tax evasion clause for selected type of transactions implemented without economic justification/substance.

n/a


• New regulations concerning TP documentation were introduced and became effective as from 1 January 2017. According to these new regulations:

- The requirement to prepare documentation (local file) depends on the income or costs of the taxpayer in a given financial year.

- Taxpayers whose income or costs, pursuant to accounting regulations, exceeded EUR 2,000,000. - Documentation has to be prepared not only for transactions in the strict sense, but also for other events

recorded in accounting books, as long as they have a significant influence on the taxpayer’s income or loss and were agreed on by the affiliated entities.

- One of the changes most beneficial to taxpayers with respect to the scope of documentation is the introduction of materiality thresholds for transactions; their value will be EUR 50-500,000, and they will be established for each taxpayer individually, depending on their income.

- The threshold level for equity links is to be raised from 5% to 25%. - The main novelty is the requirement to provide a statement of concordance of the terms of transactions and

events with the market conditions. So far, taxpayers have not been obliged to demonstrate that transactions are made in accordance with the market conditions, but only to indicate the actual settlement method.

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• Taxpayers whose income or loss exceeds EUR 20 million in a given year will also be obliged to prepare a master file demonstrating the settlement mechanisms from the perspective of the group.

• If the taxpayer’s income in a given year exceeds EUR 10 million, they are obliged to prepare benchmark studies in order to verify whether the terms of their transactions with affiliated entities follow the market price rule.

• CbC Report: the largest Polish groups of companies (with consolidated income exceeding EUR 750 million) will be obliged to draw up statements of income, tax paid, and places of business. Based on the template form published, taxpayers will have to provide a list of entities in the group, countries where they have their seats, their main business activity, the tax paid and profit earned, the number of employees, and fixed assets.



• Poland is one of the 68 signatories of the MLI. The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a

* Poland is working on the implementation of Council Directive 2014/107 / EU of 9 December 2014 amending Directive 2011/16 / EU on compulsory AEOI on taxation (OJ L 359, Volume 57, 16.12. 2014, pp. 1-30), which enables the exchange of information at EU level and the OECD CRS, which provides for a similar solution.



Country PortugalPKF member firm PKF & Associados, SROC, Lda.

Your contact José Ramos




2 Hybrids• Portugal transposed into domestic tax law the July 2014 amendment of the EU PSD disallowing the benefits of

the Directive (in essence participation exemption relief) if the “dividend income” gave rise to a “tax deduction” in the source country.

n/a

3 CFC’s• Portugal has adopted CFC legislation: profits of subsidiaries located in low-tax jurisdictions are imputed and

taxed at the level of the Portuguese shareholder, irrespective of dividend distributions. n/a

4 Interest deductions • Maximum allowed interest deduction: either EUR 1 million or 30% of adjusted EBITDA. n/a


• GAAR allowing the tax authorities to ignore the legal form of an operation/structure and to tax according to substance.

• Portugal transposed into domestic tax law the January 2015 amendment of the EU PSD, disallowing the benefits of the Directive if arrangements or a series of arrangements are considered not genuine taking into account all relevant facts and circumstances.

• The Portuguese Patent Box Regime, which provides tax benefits for IP revenues and expenses, requires a nexus element in line with the “modified nexus approach”.

n/a


• The transposition into domestic tax law of the January 2015 amendment of the EU PSD (see action point 5) also affects treaty abuse, to the extent that participation exemption rules (exempting dividend income and capital gains) are also applicable when the subsidiary / shareholder is resident in a country that has signed a DTT with Portugal.

• The “Beneficial Owner Central Register” has been created in 2017.

n/a


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11 BEPS data collection• No specific action that we are aware of. However the Portuguese tax authorities are used to exchange

information with other tax administrations.n/a


• Portuguese legislation imposes promotors (lawyers, tax consultants, accountants) involved in potentially aggressive tax planning schemes to communicate such schemes to the tax authorities (without identifying the client).

n/a


• Portuguese companies are required to maintain a local file.

• CbC tax documentation must be prepared by Portuguese ultimate holding companies. CbC reporting is also required for Portuguese subsidiaries or a Portuguese branch, if such documentation is not prepared by another group company elsewhere.

• Portuguese subsidiaries belonging to a group must identify the group company and country where CbC reporting is presented.

• Portugal is currently drafting the CbC form. The aim is to have it entered into force as from December 2017.



• Portugal is one of the 72 signatories of the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which was signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a



Country QatarPKF member firm PKF LLC

Your contact Tareq Ayoub



1 Digital economy

• Qatar Financial Centre (QFC) Tax Regime: QFC 2016 Taxation Manual provides guidelines on territorial basis of taxation of businesses engaged in electronic commerce (EC) where the principal place of business operations of a company engaged in EC is in the QFC, profits will be local-sourced, even if an intelligent server is located offshore. Conversely, a business which has all of its operations outside the QFC apart from operating an intelligent server in the QFC, will not be liable to tax.

n/a


3 CFC’s

• Qatari Tax Law No. 21 of 2009 states that subject to the provisions of tax agreements, payments made to non-residents with respect to activities not connected with a PE in the State shall be subject to a final withholding tax, as follows:

- 5% of the gross amount of royalties and technical fees. - 7% of the gross amount of interest, commissions, brokerage fees, director’s fees, attendance fees and any

other payments for services carried out wholly or partly in the State.

n/a


• Qatari Tax Law No. 21 of 2009 states that where the taxpayer enters into arrangements or carries on operations or transactions one of the main purposes of which is to avoid the payment of the tax due, the Department may counteract the tax advantage the taxpayer obtained because of such arrangements, operations or transactions, in accordance with the provisions of the executive regulations of the law. The Department may, in any of the instances provided for in the previous paragraph, take all or some of the following measures:

- Apply the arm’s length value to a deed or an economic event subjected to a different value by the taxpayer. - Re-characterise the deed where the form of such a deed does not reflect the substance thereof; and. - Adjust the amount of the tax due by the taxpayer or any other person involved in the type of arrangements,

operations or transactions provided in this Article.

n/a

111




5 Harmful tax practices • No specific action taken yet.

• Qatar signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters and CRS Multilateral Competent Authority Agreement (CRS MCAA) on 10 November 2017. New government regulations are expected to be promulgated in the future to promote transparency such as automatic exchange of CbC reports under Action 13 as well as the sharing of rulings under Action 5./a



8 TP - intangibles

• Qatari Tax Law No. 21 of 2009 states that where the taxpayer enters into arrangements or carries on operations or transactions one of the main purposes of which is to avoid the payment of the tax due, the Department may counteract the tax advantage the taxpayer obtained because of such arrangements, operations or transactions, in accordance with the provisions of the executive regulations of the law. The Department may, in any of the instances provided for in the previous paragraph, take all or some of the following measures:

- Apply the arm’s length value to a deed or an economic event subjected to a different value by the taxpayer.

- Re-characterize the deed where the form of such a deed does not reflect the substance thereof; and.

- Adjust the amount of the tax due by the taxpayer or any other person involved in the type of arrangements, operations or transactions provided in this Article.

n/a







• State Tax Regime: Qatari Tax Law No. 21 of 2009 states that head office charges are allowed as a deduction subject to a ceiling of 3% (1% for banks and insurance) of turnover less subcontract costs.

• QFC’s TP Manual refers to the OECD TP Guidelines and is expected to be updated to take into account the revisions under the 2016 TP Guidelines





• Public Revenue and Tax Department (PRTD) and the QFCA Tax Department are mandated to examine related party transactions, request and inspect transfer pricing documentation and adjust, as necessary, income or expenses based on the arm’s length standard.

• State Tax Regime: Transactions between related parties and the arm’s length principle are explicitly addressed in the general anti-avoidance provisions of the Qatari Tax Law No. 21 of 2009 and its related Executive Regulations.

• Qatar Financial Centre (QFC) Tax Regime: Part 8 of the QFC Tax Regulations and the Qatar Financial Centre Authority (QFCA) Tax Manual Extract on Transfer Pricing provides detailed guidance on the application of transfer pricing rules to ensure that chargeable profits and tax losses are calculated on an arm's length basis in line with the OECD Transfer Pricing Guidelines.

• Qatar signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters and CRS Multilateral Competent Authority Agreement (CRS MCAA) on 10 November 2017. New government regulations are expected to be promulgated in the future to promote transparency such as automatic exchange of CbC reports under Action 13 as well as the sharing of rulings under Action 5.



113



Country RomaniaPKF member firm PKF Finconta SRL

Your contact Florentina Șușnea, Alina Făniță






















• On 14 November 2017,the model and the content of the “CbC Report” form were approved, which are part of Action 13. The “CbC Report” form is submitted starting with tax year 2016 and taxpayers are required to submit this form within 12 months of the last day of the reporting tax year of the multinational enterprise group (with annual turnover exceeding EUR 750 million).

n/a



• Romania is one of the 72 signatories to the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a

115



Country RussiaPKF member firm PKF MCD

Your contact Tatiana Gavrilova, Ekaterina Batalova




• In order to allow AEOI with foreign countries for taxation purposes, in 2018 Russia plans to start implementing the MCAA on AEOI prescribed by the CRS.


3 CFC’s

• CFC rules were introduced into the Russian Tax Code on 1 January 2015. The new rules oblige individuals and legal entities to notify the Russian tax authorities in case they control foreign companies, as well as to report and confirm CFC retained earnings which will be subject to taxation.

• Article 129.5 of the Tax Code of Russia will come into force as from 2018 (in case of failure to pay or partial payment of tax due to exclusion of CFC profit from tax base). This article was not in effect for the 2015-2017 tax periods.

• The Tax Code of Russia allows inclusion of companies in the CFC list based on information obtained from foreign countries.

• Starting from September 2018 Russia plans to start implementing the MCAA on AEOI.

• Russia plans to sign bilateral agreements on exchange of tax information with several offshore territories.

• Several bylaws are to be approved.

4 Interest deductions• Thin capitalisation rules and TP rules which limit interest deductions on loan

transactions between related parties are applicable in Russia. Payables to fellow subsidiaries are automatically recognized as controlled liabilities.

n/a

5 Harmful tax practices • Not available to the public. n/a

6 Prevent treaty abuse• It is forbidden to enjoy treaty concessions in case a company receiving money from

Russia is an intermediary which then transfers the earnings to offshore territories.n/a












• Taxpayers are obliged to disclose information about beneficial owners and CFCs. n/a

13 TP – documentation • No specific action taken yet.

• The MoF of Russia has proposed a bill on preparation and presentation of CbC reporting. According to this bill, Russian taxpayers will have to file notifications if they are members of international groups. Taxpaying parent companies or authorized members of international groups will have to prepare and present CbC financial statements.

14 Dispute resolution• Russia takes part in FTA MAP Forum to discuss on general matters affecting

programs for conducting MAPs.• Work in progress.


• In order to take respective measures, Russia takes part in meetings of Ad Hoc Group on the MLI.

• Russia is one of the 72 signatories of the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which was signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

• Work in progress.

117



Country Saudi ArabiaPKF member firm PKF Al-Bassam & Al-Nemer Allied Accountants

Your contact Ibrahim AlBassam, Jaber Nassr




2 Hybrids • No specific action taken for neutralizing the effects of hybrid mismatch arrangements. n/a

3 CFC’s • No specific action taken yet for CFC Rules. n/a

4 Interest deductions • Saudi Tax Law determined a specific formula for loan interests to be accepted as an expense. n/a

5 Harmful tax practices • No specific action taken yet for countering harmful tax practices. n/a

6 Prevent treaty abuse • No specific action taken yet for preventing the granting of DTT benefits. n/a

7 PE status• Some regulations are in place for PE status even according to the signed DTTs, but no action yet for

preventing the artificial avoidance of PE Status.n/a

119



Country SlovakiaPKF member firm PKF Slovensko s.r.o.

Your contact Soňa Ugróczy



1 Digital economy• The EU VAT directive applies and is already implemented

into domestic law.n/a

2 Hybrids

• Effective 1 January 2016, Slovakia implemented new CFC rules. In general, dividends paid from the distribution of profits after 2003 are not subject to taxation in Slovakia, but only to the extent that such profits are not deductible for the subsidiary distributing such profits.

• Implementation is expected in 2018 or 2019.

• Effective 1 January 2017, dividends paid to individuals and legal entities will be taxed (for legal entities only income paid by or to non-treaty countries). The following will be subject to taxation:

- Dividends and other distribution of profits including income paid to “silent partners” in the tax period beginning at earliest 1 January 2017

- Assets remaining after liquidation of a company or cooperative if either of them is being liquidated from 1 January 2017 or if a court rules on the dissolution of a company after 1 January 2017

- Any settlement defined in the regular separate financial statements for the reporting period beginning 1 January 2017

• The personal tax rate is 7%, 35% for non-treaty countries or according to the relevant DTT

3 CFC’s

• Implementation is expected in 2018 – 2019.

• As an EU member state, Slovakia is subject to the ATAD, which must be implemented into its domestic law by 31 December 2018. The ATAD includes a CFC rule.

n/a





• Thin capitalization rules were reintroduced on 1 January 2015, although not directly, as part of the implementation of the OECD BEPS Action Plan. Between 2004 and 2014 there were no limitations on tax deductions for both related and unrelated party interest expense and economically equivalent payments. As of 1 January 2015, there is a limitation of tax-deductible interest from loans provided by local and foreign related parties and hereto related expenses equal to 5% of EBIDTA.

• No carry-over of “excess interest” is allowed.

n/a

5 Harmful tax practices• R&D super deduction (25% of eligible costs) has already been implemented into domestic law (1 January 2015).

• Implementation is expected in 2017 or 2018.n/a


7 PE status• Slovak tax law already addresses the issue of artificial avoidance of a PE.

• Implementation is expected in 2017 – 2018 – 2019.n/a

8 TP - intangibles • No specific action taken yet.• Implementation is

expected in 2017 - 2018 - 2019.


• No specific action taken yet.• Implementation is

expected in 2017 - 2018 - 2019.


• No specific action taken yet.• Implementation is

expected in 2017 - 2018 - 2019.




121





• In Slovakia, all the taxpayers conducting related-party transactions (either domestic or cross-border) are obliged to prepare and maintain TP documentation to a certain extent.

• An approved law introducing so-called "CbC-reporting”. On 1 February 2017, the Parliament finally approved the government bill amending Act no.442/2012 Coll. On international assistance and co-operation in tax administration. The law became effective on 1 March 2017.

• Multinational companies will be obliged to include CbCR into their Master and Local files, if their consolidated turnover exceeds EUR 750 million.



• Slovakia is one of the 72 signatories to the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which was signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

• Implementation is expected in 2017 - 2018 - 2019.



Country SloveniaPKF member firm PKF d.o.o., Ljubljana

Your contact Tomaž Lajnšček, Primož Pečnik










123












13 TP – documentation• Council Directive (EU) 2016/881 has been adopted in May 2016. It has also

been implemented into Slovenian Tax Procedure Law with effect from January 2017 and first CbC reporting instructions have been issued.

• Slovenia signed the MCAA for the automatic exchange of CbC reports on 27 January 2016. The MCAA will enable consistent and swift implementation of new TP reporting standards developed under Action 13 of the BEPS Action Plan.



• Slovenia is one of the 72 signatories of the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which was signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a



Country South AfricaPKF member firm PKF Durban

Your contact Paul Gering



1 Digital economy• As from 1 June 2014, VAT legislation has been enacted to impose an

obligation on foreign suppliers of electronic services to register and charge VAT.

• As this is fairly new legislation, its effectiveness will have to be reviewed before any significant changes can be made.

2 Hybrids• Various complex anti-avoidance provisions exist which deal with hybrid

instruments aimed at particular transactions.

• The Davis Tax Committee has recommended that the anti-avoidance provisions be broadened to cover a range of transactions without undue technicality.

3 CFC’s • South Africa has extremely complex and constantly evolving CFC legislation. • Simplifying the aforesaid highly complex legislation.

4 Interest deductions• As from 1 January 2015, income tax legislation has been enacted to limit the

interest deduction in respect of certain transactions where the recipient of interest is not subject to tax in South Africa.

n/a

5 Harmful tax practices• South Africa currently has a headquarter regime as well as an incentive for

companies operating in special economic zones.

• The Davis Tax Committee express concern with these regimes and recommend minimum substance requirements have to be incorporated into these regimes.

6 Prevent treaty abuse • GAAR exist which prohibit treaty abuse such as treaty shopping etc.• Various DTT’s are being renegotiated by the South

African Government with various countries such as Germany, Malawi, Namibia and Zambia.

7 PE status• The Interpretation Note dealing with PEs was revised to bring it in line with the

recommendations of the OECD. n/a

125




8 TP - intangibles

• General TP rules anti-avoidance provisions exist to ensure prices are at arm’s length.

• Specific anti-avoidance provisions exist which deny the deduction of royalty payments where the IP is licensed in South Africa but has been exported.

• Exchange control regulations also limit the exporting of IP and require approval of royalty rates payable abroad. The approvals process has been relaxed to an extent as approval is only required from the Department of Trade and Industry. No longer is approval required from the Financial Surveillance Department of the South African Reserve Bank.

n/a


• General TP rules/thin capitalization anti-avoidance provisions exist to ensure prices are at arm’s length. n/a


• General TP rules anti-avoidance provisions exist to ensure prices are at arm’s length. n/a


• The USA FATCA Intergovernmental Agreement is an agreement between the governments (tax administrations) of the USA and the Republic of South Africa to exchange information automatically under the provisions of the DTT between these countries.

• The Standard for AEOI in tax matters (CRS) is the Global Model for AEOI under the MCAA of which South Africa is a signatory.

• The CRS is a standardized automatic exchange model, which builds on the FATCA IGA to maximize efficiency and minimize costs, except that the ambit is now extended to all foreign held accounts and not only those of US citizens. South Africa is also one of the early adopters of the CRS and is committed to commence exchange of information automatically on a wider front from 2017, together with over 90 other jurisdictions.

• For years of assessment commencing 1 January 2016, the ultimate parent company of a MNE group that is tax resident in South Africa will be required to file a CbC report to SARS. The threshold for reporting to SARS is a consolidated MNE group turnover of at least R10 billion in the fiscal year prior to the year in which the CbC report must be submitted.

n/a


• South Africa legislation places an obligation on facilitators of tax schemes to disclose certain types of transactions to the revenue authority. These transaction types are listed as reportable arrangements.

• The list of reportable arrangements has been extended to encompass additional transaction types that the revenue authority views as being high risk.

n/a





• For years of assessment commencing on or after 1 October 2016, companies which transact cross-border with connected persons whereby such transactions exceed or are reasonably expected to exceed R100 million are required to maintain TP policy documentation.

n/a

14 Dispute resolution• MAP is contained in the majority of DTTs and can be followed to resolve

international tax disputes.n/a


• A multilateral convention on mutual administrative assistance on tax matters (as amended by the protocol) was entered into with date of entry into force of 1 March 2014.

• A multilateral African Tax Administration Forum Agreement on Mutual Assistance in Tax Matters and a multilateral Southern African Development Community Agreement on Assistance in Tax Matters was also signed and ratified in South Africa but has not yet come into effect.

• Various tax exchange of information agreements have also been entered into. These include Argentina, Bahamas, Barbados, Belize, Bermuda, Cayman Islands, Cook Islands, Gibraltar, Guernsey, Jersey, Liberia, Liechtenstein, San Marino and St Kitts and Nevis.

• South Africa is one of the 72 signatories to the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which was signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

• New tax information exchange of information is in the process of negotiation with Andorra, Brunei Darussalam, Costa Rica, Dominica, Grenada, Isle of Man, Jamaica, Macao SAR, Maldives, Marshall Islands, Monaco, Panama, Samoa, St. Lucia, Turks and Caicos Islands and Uruguay.

127



Country South KoreaPKF member firm PFK SEJONG

Your contact Steve Minhoo Kim





3 CFC’s• No specific action taken yet. However, Law for coordination of International Tax Affairs (“LCITA”) of Korea

and the presidential enforcement decree thereof contain some procedures similar to CFC rules.n/a




• In May 2016, South Korea signed an amended double taxation treaty with the Czech Republic on a separate basis as both countries did not designate each other as Covered Tax Agreements (CTAs), i.e. tax treaties to be amended through the MLI.

• This is the very first DTT that South Korea has amended in such a way that it fully reflects Action 6 of BEPS, which is one of the minimum standards.

n/a


8 TP - intangibles • No specific action taken yet n/a












• South Korea became one of 39 signatories of CbC Multilateral Competent Authority Agreement (“MCAA”) as of 30 June 2016

• As the U.S. is not a part of CbC MCAA signatories, South Korea signed a separate Bilateral Competent Authority Agreement on the exchange of CbC reports with the US on 22 June 2017.

• Starting from FY2016 and onwards, South Korea requires corporate taxpayers in Korea to file both the local and master files if all of the following thresholds are satisfied:

- Annual aggregate volume of intercompany transaction(s) exceeds KRW 50 billion; and - Annual revenue exceeds KRW 100 billion.

• For CbC report, when the Korean taxpayer is an ultimate parent company of its group / MNE and satisfies the following threshold, then it is required to submit CbC report to the Korean tax authorities:

- Sales revenue exceeding KRW 1 trillion (approx. EUR 750 million) per consolidated financial statements for the preceding year.

n/a



• South Korea is one of the 72 signatories to the MLI. The MLI, which was signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a

129



Country SpainPKF member firm PKF Attest

Your contact Gonzalo Vélez, Álvaro Beñarán, Cecilia Flores

Email [email protected], [email protected], [email protected]


1 Digital economy• The Spanish government has modified domestic VAT Law including the EU Council Implementing

Regulation (EU) No 1042/2013 of 7 October 2013, through Law 28/2014 (of 27 November 2014). In particular, VAT on business to customer digital services, applicable since January 2015.

• PE consideration will include “significant digital activities” definition.

2 Hybrids

• Expenses derived from controlled transactions will not be deemed as tax deductible in case the related counterparty considers the related income as tax exempt or with an effective tax rate below 10%.

• Exemption for avoiding double taxation will not apply to dividends where the distribution gives rise to a tax-deductible expense.

• EU PSD amendment has been implemented, disallowing the benefits of the Directive when transactions are only aimed to achieve a tax relief.

• Specific rule against profit-participating loans interest deduction.

n/a

3 CFC’s

• Income derived from foreign subsidiaries is imputed provided that:

- A participation >50% is held; - A source tax rate applicable to such income is <75% of the applicable Spanish tax rate.

• UCITs under Directive 2009/65/CE are excluded if incorporated and domiciled in an EU Member State.

• A thorough review of CFC legislation is expected.


• Net financial expenses are only tax deductible up to the higher of EUR 1,000,000 or 30% of EBITDA.

• Financial expenses within groups of companies aimed to (i) acquire shares of other companies or (ii) perform capital contributions to other companies of the group, will not be tax deductible unless a valid economic reason other than achieving a tax relief is proved.

• Note: EU Member States like Spain are subject to the Anti-Tax Avoidance Directive (ATAD) published in January 2016. The ATAD contains several measures regarding Action 2 and Action 4, which should be adopted by Member States no later than 1 January 2024.

n/a





• New measures aimed at specifically fighting harmful tax practices and artificial instruments leading to tax savings or designed for tax purposes were adopted by Law 27/2014 from 27 November 2014 (Spanish Income Tax Law) in its article 23. It was later modified by Law 48/2015 from 29 October 2015 (Spanish Budget Act) regarding the formula to be applied to deductions.

n/a

6 Prevent treaty abuse • “Beneficial owner” clauses are being negotiated in new DTTs.• The MLI has been signed on 7 June

2017 by Spain. Expected to be in force in 2018.

7 PE status • No specific action taken yet.• PE consideration / definition will be

reviewed









131





• TP documentation (Master and CbC files) should not be mandatorily filed but should be held at the disposal of the tax authorities, if requested. A year before, the Spanish subsidiary should inform the designated group entity and tax residence where the CbC report will be submitted.

• Documentation requirements have been simplified for groups with a global turnover not exceeding EUR 45 million.

• CbC report will be mandatory as of 2016 for groups with a global turnover exceeding EUR 750 million.

• On 27 January 2016, Spain has signed the MCAA for the automatic exchange of CbC reports.

• A Double Taxation Convention (DTC) on Competent Authority Arrangement (CAA) with the EU is under negotiation.

14 Dispute resolution• No specific action taken yet.

• (Spain will be included in the third group of countries of the MAP).• The report will be published in 2018.


• Spain is one of the 72 signatories to the MLI (http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). The MLI, which was signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

• It is expected that first MLI implementations will be done in the course of 2018.



Country Sultanate of OmanPKF member firm PKF L.L.C.

Your contact Percy R. Bhaya










133















* Please note that Oman is not an OECD member state. Furthermore, Oman Income tax law doesn’t provide for any of the 15 actions laid down under the OECD’s action plan on BEPS. Hence, no specific action has been taken and/or is in the pipeline on any of the 15 action points laid down under the BEPS action plan in Oman.



Country SwazilandPKF member firm PKF Chartered Accountants Swaziland

Your contact Kelly Phillips

Email [email protected] / [email protected]




3 CFC’s • There are no controlled foreign company rules in Swaziland.

• SIPA is currently functional but it is not a one-stop-shop for foreign investors.

4 Interest deductions• In Swaziland interest is deductible as long as it is incurred in the production of income. There are no thin

capitalisation rules in Swaziland.n/a



7 PE status

• PE in Swaziland is determined according to physical presence. The definition of PE means a fixed place of business through which the business of the enterprise is wholly or partly carried on. An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries business in that State through a broker, general commission agent or any other agent of an independent status where such persons are acting in the ordinary course of their business.

n/a

135




8 TP - intangibles• No specific action taken yet. Swaziland does not have transfer pricing legislation. However, under the anti-

avoidance provision the Revenue Authority might challenge the arm’s length nature of a transaction.n/a


• No specific action taken yet. Swaziland does not have transfer pricing legislation. However, under the anti-avoidance provision the Revenue Authority might challenge the arm’s length nature of a transaction.

n/a


• No specific action taken yet. Swaziland does not have transfer pricing legislation. However, under the anti-avoidance provision the Revenue Authority might challenge the arm’s length nature of a transaction.

n/a




13 TP – documentation • There is currently no transfer pricing legislation. n/a

14 Dispute resolution • None. Swaziland does not have a tax tribunal. n/a

15 Multilateral instrument • Swaziland has not signed the MLI. n/a



Country SwedenPKF member firm PKF Revidentia AB

Your contact Karin Rosén



1 Digital economy • The EU VAT directive applies and is already implemented into domestic law. n/a

2 Hybrids• Sweden does not have the proposed legislation. The MoF is working on the question whether there should be

changes in Swedish law or not.n/a

3 CFC’s• Sweden already has legislation in this area. It differs somewhat from the report’s recommendations. It is not clear

whether the Swedish rules will be changed. The issue lies with the MoF.n/a

4 Interest deductions• Sweden has rules that limit the deductibility of interest in some cases. A review of these rules is ongoing within

the framework of the so-called Corporate Tax Committee’s work. A proposal will probably be given during spring 2016. No proposal has yet been published.

n/a


• Sweden does not have any preferential tax regimes and does not provide any such preliminary covered by the report. Sweden will not send any information. However, Sweden will receive information on advance notice, as provided in other countries, where there is a transaction that affects one in Sweden and the preliminary decision includes a favourable tax regime. Information will be subject to confidentiality in Sweden.

n/a

6 Prevent treaty abuse• No specific action taken yet. No matter how minimum standard becomes a part of the DTTs between Sweden

and other countries, it is required that new treaties or amendments to treaties are approved by new legislation for it to apply in Sweden.

n/a

7 PE status• No specific action taken yet other than the definitions followed in OECD Model DTT. However, there is a need for

a change in Swedish law. The issue lies with the MoF.n/a

8 TP - intangibles• Sweden has laws about how pricing will take place between associated enterprises. The legislation is based on

the arm’s length principle. No need for change in law.n/a

137








11 BEPS data collection• The Tax Agency will monitor the area and developments to ensure that the

BEPS implications are reflected in Swedish taxation.n/a


• Sweden currently lacks rules on mandatory reporting for companies or advisers. The issue of such rules to be introduced lies with the MoF.

n/a

13 TP – documentation• Sweden has implemented BEPS Action 13, and requires the master and local

file documentation format for TP documentation.

• Financial years starting on or after 1 April 2017.

• CbC reporting has been introduced. Certain larger groups (i.e. groups with a consolidated turnover of over 7 billion SEK / 750 million EUR) will have to file a CbC report by 31 December 2017, covering financial year 2016. Swedish entities are expected to notify the STA regarding the identity and jurisdiction of the reporting entity within the reporting fiscal year.

• Financial years that begin on or after 1 January 2016.

14 Dispute resolution• Sweden meets the minimum standard. New amendments to tax treaties need

to be approved by new legislation for it to apply in Sweden.n/a


• Sweden participates in the group that will present a proposal on the joint agreement. Whether Sweden signs a joint agreement or renegotiates its individual tax agreements needs to be approved by legislation to take effect in Sweden.

• Sweden is one of the 72 signatories to the MLI. The MLI, which was signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a



Country SwitzerlandPKF member firm PKF Consulting AG

Your contact Margarita Baeriswyl



1 Digital economy• No specific action taken yet and not yet known whether and

how this will be implemented.n/a

2 Hybrids • No specific action taken yet.

• On 7 June 2017 Switzerland signed the MLI on the implementation of tax related measures against BEPS. Along with the list of treaties to be "automatically" amended to adapt to BEPS Action 2 (also 6, 7 and 14), Switzerland submitted a provisional list of reservations and notifications in respect of the provisions of the MLI.

• Relating to BEPS Action 2, Switzerland has made reservations in order not to apply article 3 (fiscally transparent entities) and article 4 (dual resident entities). However, notified to apply to its residents the switch-over clause (option A) as per article 5.

• The definitive MLI positions will be known upon “ratification” of the MLI. Since it has been announced that a public consultation in Switzerland will begin at the end of 2017, entry into force is not anticipated prior to 2019. Therefore, it remains to be seen whether and how this will be implemented in practice.

3 CFC’s• No specific action taken yet. Switzerland does not have

CFC legislation and there is no intention to introduce a CFC regime at this point in time.

n/a

4 Interest deductions• No specific action taken yet. The current view is that the

existing thin capitalisation rules are sufficient to prevent unreasonable interest deductions.

n/a

139




5 Harmful tax practices (Continued)


• Swiss tax reform III including BEPS was rejected by public vote on 12 February 2017. As a “substitute”, on 6 September 2017, the Federal Council initiated the consultation on tax proposal 17. The duration of the consultation procedure is three months. The Federal Council shall submit its dispatch to the Parliament in Spring 2018. Consequently, entry into force of the new legislation is expected no earlier than 2020. As part of the legislative process for tax proposal 17, preferential tax regimes are expected to be abolished and a new patent box regime implemented in line with Action 5 recommendations.

• The Federal Council adopted the total revision of the Tax Administrative Assistance Ordinance and brought it into force on 1 January 2017. The new ordinance defines the framework and the procedures required for the spontaneous exchange of information including those that apply for the exchange of information on advance tax rulings. The first spontaneous exchanges of information with Switzerland will take place from 1 January 2018 onwards and will apply for tax periods starting from then. For the specific case of the advance tax rulings, the ordinance defines which categories are subject to spontaneous exchanges and which countries have to be informed. Regarding the relevant timeframe and scope:

• All new rulings (falling in one of the defined categories) will be subject to the spontaneous exchange of information as from 1 January 2018.

• Tax rulings (falling in one of the defined categories) issued after 1 January 2010 and still effective on 1 January 2018 (or 2017 in case of specific agreements) would be subject to the spontaneous exchange of information.

6 Prevent treaty abuse• No specific action taken yet. Switzerland already

has either PPT or LoB clauses in certain tax treaties.

• With the signed MLI Switzerland did not express any reservations on article 6 (purpose of a treaty). In respect of article 7 (prevention of treaty abuse), Switzerland notified the respective provisions in its treaties but did not make an explicit choice. Thus, the PPT will apply as the minimum standard and default option. More treaties and the multilateral treaty are expected to include the PPT clause in the future. Furthermore, Switzerland has reserved the right for articles 8 to 11 (specific anti-abuse rules / saving clause to preserve the rights to tax its own residents) not to apply to its treaties.




7 PE status • No specific action taken yet.• With the signed MLI Switzerland has reserved its

right not to apply any of the provisions regarding the avoidance of PE status (articles 12 – 15).

8 TP - intangibles• In the absence of specific TP rules in domestic law, the OECD TP guidelines form the

basis for determining the arm’s length nature of intragroup transactions for Swiss tax purposes. As such, the new guidelines are valid with immediate effect.

n/a





11 BEPS data collection• The Federal Council has tasked the Federal Department of Finance with assessing

possible changes to national legislation that should be considered based on the BEPS recommendations.

n/a


• No specific action taken yet. Switzerland has declared that it is currently not considering participating in this action.

n/a


• Switzerland does not plan to make transfer pricing documentation compulsory, but it is expected to monitor the situation. Taxpayers may need to make available the Masterfile that already must be prepared as part of tax audits.

• Switzerland has introduced legislation to make CbC reporting mandatory for Swiss-based multinational companies if the group revenue exceeds the threshold defined by the OECD and signed the MCAA for the automatic exchange of CbC reports. The corresponding law and the multilateral agreement were adopted by Parliament in the 2017 summer session. Given that a referendum was not called on these proposals, the Federal Council decided during its meeting of 17 October 2017 to bring the law into force on 1 December 2017 and the agreement in December 2017. Multinationals in Switzerland will thus be obliged to start drawing up a CbC report from tax year 2018 onwards. Switzerland and its partner states will therefore exchange CbC reports as from 2020.

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141




14 Dispute resolution• No specific action taken yet. Switzerland has committed to binding

arbitration (subject to implementation of the MLI; see hereafter).

• With the signed MLI Switzerland will meet the minimum standards by agreeing in its tax treaties the maximum time period during which jurisdictions can make adjustments to the profits of domestic tax payers (article 16). Switzerland notified the existing provisions on transfer pricing adjustments in its treaties to be amended; thus, article 17 of the MLI does not apply. Switzerland reserves the right to replace the two-year period provided by article 19 of the MLI to resolve a case by mutual agreement between the competent authorities within a three-year period. Switzerland did not comment on articles 20 - 23 of the MLI.


• The Federal Council has already approved this roadmap, and the Federal Department of Finance has been instructed to take into account the BEPS actions when negotiating new DTTs.

• Switzerland is one of the 72 signatories to the MLI. The MLI, which was signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

• Since it has been announced that a public consultation in Switzerland will begin at the end of 2017, entry into force is not anticipated prior to 2019. Therefore, it remains to be seen how the MLI will be implemented in practice (see above).

• Plan to implement the MLI to "automatically" amend existing Swiss tax treaties, to adapt to BEPS Actions 2, 6, 7 and 14.



Country ThailandPKF member firm PKF Thailand

Your contact John Casella





3 CFC’s • There is no CFC legislation in Thailand. n/a





143











• Thailand has signed a memorandum of understanding concerning the compliance with the Foreign Account Tax Compliance Act (FATCA) with the US government.

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13 TP – documentation• There are no mandatory TP documentation requirements. Closely aligned with the OECD TP guidelines, the

domestic TP guidelines assist Thai tax authorities when conducting a TP audit.

• The domestic TP legislation is currently in draft and has not yet entered into force.





Country TunisiaPKF member firm PKF Cabinet Lassaad Marwani&co

Your contact Lassaad Marouani





3 CFC’s • No specific action taken yet. Tunisian tax law does not contain CFC rules. n/a

4 Interest deductions• There are no thin capitalization rules in Tunisia. However, interest payments on shareholder loans may be

recharacterized as dividends under certain circumstances.n/a



7 PE status• PE is defined largely as any centre of activity that must be taxed according to duration and activity (construction,

services and others).n/a


145












• Finance Law 2010 introduced a general transfer pricing rule for commercial and financial transactions between related parties.

• Two companies are considered related parties when it is established that one entity has the decision power in the other company either directly or via an intermediate person. The definition of related parties also includes parent companies and their subsidiaries as defined by article 461 of the Commercial Companies Law. Public guideline No. 33 for 2010 extended the definition of related parties to cover also resident and non-resident entities having a contractual relation which stipulates the pricing policy for the Tunisia resident entity.

• Advance pricing agreements are not provided for in Tunisia.

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14 Dispute resolution • A dispute resolution rule is included in all Tunisian DTTs. n/a

15 Multilateral instrument • Tunisia has expressed its intention to sign the MLI. Work in progress.



Country TurkeyPKF member firm PKF İstanbul

Your contact Kadir Sayici, Mehmet Caltekin





3 CFC’s• CFC rules exist in Turkey. They apply where a resident company has at least a 50% interest in a non-resident

company and certain other conditions apply.n/a



• Any payment made in cash or via a bank account to a corporation (including a branch of a resident corporation) that is operational or established in a country regarded by the Turkish Council of Ministers to undermine fair tax competition (through other practices or taxation) may be taxed in Turkey through the application of withholding tax at a rate of 30%. The Turkish Council of Ministers has not yet determined which countries receiving payments will be considered as ‘tax havens’. With respect to withholding tax, the Council of Ministers is granted the authority to determine the rate of taxation and specify the scope of work to be done with respect to payments made to purchase goods or participation stocks, for rent, for sea or air transportation, and payments which must be made for the completion of work done. However, while the authority is given to the Council of Ministers, there are two fundamental criteria regarding the determination of the countries which will be under the scope of such application. These are:

- Whether or not the taxation system of the other country to where the payments are transferred provides taxation opportunities as at the same level as the Turkish tax system; or;

- The information exchange mechanism

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147




5 Harmful tax practices(Continued)

• The Council of Ministers has not yet issued such a list of countries On 19 October 2017, Decree No. 2017/10821 related to the Technology Developing Zones Law (Law No. 4691) was published in the Official Gazette. The Decree clarifies the implementation of the corporate and personal income tax exemption provided by the temporary article 2 of Law No. 4691. According to this article, income derived by technology development managing companies and taxpayers with software development and R&D activities in technology development zones is exempted until 31 December 2023. The main provisions of the Decree regarding implementation of the tax exemption are as follows:

- If the tax exempt income is derived from the alienation or leasing of intangibles, a patent or equivalent certificate is required;

- Certificates equivalent to a patent certificate are the utility model certificate, design registration certificate, copyright registration certificate, integrated circuit topography, etc.;

- Taxpayers with income derived from intangibles not exceeding TRY 30 million (and net sales revenue of TRY 200 million) may benefit from the tax exemption without any patent or equivalent certificate;

- The upper limit of the tax exempt income is determined based on the eligible expenditures/total expenditures ratio; and

- Eligible expenditures are defined as expenditures which are directly related to intangibles.

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8 TP - intangibles • No specific action taken yet other than application of arm’s length principle to related party transactions. n/a


• No specific action taken yet other than application of arm’s length principle to related party transactions. n/a


• No specific action taken yet other than application of arm’s length principle to related party transactions. n/a







13 TP – documentation • No specific action taken yet other than application of arm’s length principle to related party transactions. n/a



• Turkey is one of the 72 signatories to the MLI. The MLI, which was signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

n/a

149



Country United Arab EmiratesPKF member firm PKF UAE

Your contact Sarika Dhameja




• VAT will be introduced from 1 January 2018 and extends to all goods and services, including digital products and services as per the provisions of the law.





• With a view to improving transparency and ensuring AEOI in the near future, the UAE has taken a few measures:

- The UAE Signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAC) on 21 April 2017, that would enable the UAE to fulfil its commitment to begin AEOI furthering the aim of preventing tax evasion. The convention is not yet in force in the UAE.

- The UAE has also signed the MCAA, to activate the system of exchange of tax information in accordance with the CRS.

- The country has signed 104 DTTs, 8 agreements on the exchange of information for tax purposes, in addition to an agreement with the US on FATCA.

- The UAE has joined the Global Forum on Transparency and Exchange of Information for Tax Purposes which is the key international body working on the implementation of information exchange international standards.

• Based on the above measures, one can say that ground work is being laid out to ensure that the UAE’s commitment to AEOI is progressing.




5 Harmful tax practices(Continued)

- The UAE MoF signed a Memorandum of Understanding with the OECD to build a partnership with regard to taxation matters, whereby the UAE has become a training hub for MENA for the exchange of information and is building a qualified and active network of tax experiences among the countries of the region.


• A tax residency certificate issued by the UAE MoF is mandatory for claiming benefit under UAE DTTs. To ensure that only genuine assesses can claim a benefit, a minimum threshold of 180 days physical presence has been set by MoF to be able to apply for a tax residency certificate. This action was implemented by MoF in the first quarter of 2016.

n/a

7 PE status • No specific action taken yet n/a

8 TP - intangibles • No specific action taken yet n/a


• No specific action taken yet n/a



11 BEPS data collection • No specific action taken yet n/a



151





• On 21 April 2017, the UAE signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MCMAATA), which includes provisions that would make it easier for the UAE to implement automatic exchange of CbC reports on the tax affairs of multinational corporations with other countries’ tax administrations under action 13. The convention is not yet in force in the UAE.

n/a



* The UAE is part of the Global Forum on Transparency and Exchange of Information for Tax Purposes [establishment in 2009 by G20 and OECD] which has 104 members. This forum has become the key international body working on the implementation of information exchange international standards. The UAE was the first Arab country to win a seat on the International Steering Committee, and in 2014 the Global Forum decided that the UAE will move forward to the second phase of evaluation which is slated to end in 2017.

* The UAE MoF also organized a number of introductory workshops on the exchange of tax information, which witnessed the participation of tax experts from all over the world. These workshops discussed the common international standards in the field of tax reports, implementation mechanisms and approved legal frameworks. The aim was to develop a system for automatic exchange of tax information while complying with the rules of confidentiality of the exchanged tax information. (Source: UAE MoF Website)



Country United KingdomPKF member firm PKF Cooper Parry

Your contact Stephen Bryan



1 Digital economy

• The UK implemented measures to treat the country of consumption as the place of supply of digital supplies for VAT purposes with effect from 1 January 2015.

• The UK’s responses to action points 3 (CFCs), 7 (PE’s) and 8-10 (TP) are intended to also address other aspects of action point 1.

• The Government released a position paper in November 2017 setting out its proposals for taxing the digital economy. The government is particularly focusing on taxing businesses serving UK consumers where there is significant ‘user-generated value’ created in the UK e.g. online marketplaces and social media businesses. The government is seeking views on its proposals and hopes the paper will stimulate debate ahead of the publication of the OECD’s interim report on this subject next Spring. Comments on the paper are invited by 31 January 2018.

2 Hybrids

• The UK has enacted new measures through legislation contained in Finance Act 2016 to address hybrid mismatch arrangements with effect from 1 January 2017.

• On 16 November 2017, the UK enacted certain amendments to the anti-hybrid rules which were published in the Finance Bill (No 2) 2017 on 8 September 2017. This legislation brings back a number of measures which were originally included in the Finance Bill published in March but subsequently withdrawn in late April following the announcement of the snap General Election in June. The changes make three minor technical changes to the rules, the first change in respect of local taxes has effect from 13 July 2017 while the other two changes have effect from 1 January 2017.

• A number of technical changes are being introduced to the regime on hybrid and other mismatches. These were announced in the 2017 Autumn statement which took place on 22 November 2017. Some of the changes will apply retrospectively to when the legislation first came into effect (1 January 2017) and some will have effect from 1 January 2018.

153




3 CFC’s

• The UK modernized its CFC rules in 2012 and the changes made at that time used elements of the various approaches referred to in the OECD report, so no further changes are considered to be necessary.

• On 16 November 2017, the decision of the European Commission opening a formal State aid investigation into the group financing exemption contained within the UK’s CFC rules was made public. This decision sets out the scope of the Commission’s investigation and provides more detail of its position.


• On 16 November 2017, the UK enacted the new legislation incorporated in Finance Bill (No 2) 2017 to restrict relief for interest to 30% of EBITDA - a higher threshold will apply to groups of companies where their external borrowing exceeds 30% of EBITDA. Exemptions may apply where the total UK interest expense is less than £2 million per annum. The new legislation takes effect from 1 April 2017.

• The UK government announced at the 2017 Autumn Statement that it will legislate in both Finance Bill 2017-18 and Finance Bill 2018-19 to make technical amendments to the corporate interest restriction rules. This will ensure the regime works as intended. Certain of these amendments are treated as having effect on and after 1 April 2017, when the corporate interest restriction rules commenced. The remainder of the amendments have effect on and after 1 January 2018.


• Revisions to the Patent Box regime have been included in Finance Act 2016 to implement ‘nexus principle’ in action point 5, with effect from 1 July 2016.

• On 16 November 2017, the UK enacted the legislation incorporated in Finance Bill (No 2) 2017 to amend the patent box regime and ensure that when two or more companies collaborate to undertake research and development under a cost sharing agreement that they are treated fairly. The new legislation takes effect for accounting periods beginning on or after 1 April 2017.

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• The scope of UK withholding tax on royalties has been changed for payments made on or after 28 June 2016. The new legislation makes changes to the definition of royalties as well as changes to whether a payment has a UK source. Treaty relief will be denied for certain intellectual property royalty (or similar) payments made to connected persons under DTT avoidance arrangements.

• On 1 December 2017, the Government launched a consultation on extending the royalty withholding tax regime. The extended regime would apply where the UK does not have a suitable tax treaty with the recipient territory, to cover payments made to related parties in connection with UK sales. It is proposed to apply even where the payer does not have a UK taxable presence. The Government intends to introduce the measures from April 2019 subject to consultation.




6 Prevent treaty abuse(Continued)

• On 1 November 2016, Colombia and the UK signed a Treaty to Avoid Double Taxation. The treaty includes provisions consistent with the treaty-based recommendations from the BEPS project.

• The MLI opened for signature in December 2016 and the first signing ceremony took place on 7 June 2017. The UK signed the MLI on 7 June 2017, along with 67 other jurisdictions. At the time of signature, each signatory provided a document to the OECD which sets out their Covered Tax Agreements and their reservations and notifications in respect of the MLI.

• Implementation of the anti-abuse provisions is dealt with in article 7 of the MLI where countries must adopt a PPT, a simplified LoB test or negotiate their own detailed limitation of benefits provision. The UK position was set out in an open event held by HM Treasury on 12 December 2016 and in the document provided to the OECD at the time of signature. The UK intends to opt for the PPT except where the treaty partner wants to opt out and seek to negotiate a detailed LoB provision instead.

7 PE status

• The Diverted Profits Tax took effect from 1 April 2015 which counters certain arrangements where a foreign entity creates a presence in the UK which falls short of PE status.

• On 1 November 2016, Colombia and the UK signed a Treaty to Avoid Double Taxation. In relation to Action 7, the Treaty contains an anti-fragmentation rule and a paragraph addressing on the splitting-up of contracts applicable to both the construction PE and the service PE clauses, but it does not contain, nevertheless, the new language on the agency PE clause.

• The MLI opened for signature in December 2016 and the first signing ceremony took place on 7 June 2017. The UK signed the MLI on 7 June 2017, along with 67 other jurisdictions. At the time of signature, each signatory provided a document to the OECD which sets out their Covered Tax Agreements and their reservations and notifications in respect of the MLI.

• The UK position on the permanent establishment provisions within the MLI was set out in an open event held by HM Treasury on 12 December 2016, and in the document provided to the OECD at the time of signing. The UK does not plan to adopt most of the provisions targeting abuse involving PEs, other than the anti-fragmentation rule and the revised definition of closely related persons.

n/a.

155




8 TP - intangibles• Finance Act 2016 includes legislation which maintains the link between the UK tax legislation

and the OECD’s updated TP guidelines.n/a







• UK legislation constantly evolving in this area, notable developments include:

• New legislation has been introduced requiring certain UK companies to formally publish their tax strategy. The measure applies if in the previous tax year, the company has turnover above GBP 200 million or a balance sheet over GBP 2 billion. For groups and sub-groups, it’s the combined totals of all the relevant bodies that are considered. The first tax strategy needs to be published by the end of the first financial year after 15 September 2016.

• On 17 October 2016, the UK HM Revenue & Customs (HMRC) released updated guidance on Disclosure of tax avoidance schemes.

• On 5 September 2016 HMRC launched the Worldwide Disclosure facility. This is perceived as the final chance to encourage taxpayers to come forward before the automatic exchange of taxpayer information under the CRS.

• From 30 September 2018, the UK will impose new and stricter sanctions under the Requirement to Correct.





• The UK has implemented CbCR reporting regulations to give effect to the recommendations in Action 13. CbCR is mandatory in the UK for accounting periods beginning on or after 1 January 2016 and therefore the first accounting periods impacted by the reporting are for the year ended 31 December 2016.

• An annual notification requirement applies to fiscal reporting on or after 1 January 2016 and needs to be submitted by the end of the reporting fiscal period. The first notifications must be received by the later of the end of the reporting fiscal period or 1 September 2017. The notifications must be emailed to HMRC and include the name and tax reference of the entity which will file the CbC report and the names and tax references for all the MNE group’s entities that are resident in the UK, are UK PEs or are UK partnerships.

• On 15 August 2017, HM Revenue & Customs released guidance on CbCr.

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• On 26 September 2017, the OECD released the UK’s peer review report of the BEPS minimum standards under Action 14 on strengthening the effectiveness and efficiency of the MAP, which is accompanied by a document addressing the implementation of best practices. The report concludes that the UK meets most of the terms of the minimum standard.

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• The MLI opened for signature in December 2016 and the first signing ceremony took place on 7 June 2017. The UK signed the MLI on 7 June 2017, along with 67 other jurisdictions. The MLI is still open for signature and further jurisdictions are expected to sign. At the time of signature, each signatory provided a document to the OECD which sets out their Covered Tax Agreements and their reservations and notifications in respect of the MLI.

• Although the ad hoc group that developed the Instrument was chaired by Mike Williams of HM Treasury, the UK has already indicated an intention to make a number of reservations regarding certain provisions of the instrument, which were detailed in the document provided to the OECD at the time of signing. These have been set out under the relevant actions above.

n/a

157



Country United StatesPKF member firm PKF O’Connor Davies, LLP

Your contact Leo Parmegiani



1 Digital economy • No specific action taken yet, as the US does not follow OECD. n/a

2 Hybrids

• The Unites States House of Representatives and Senate signed the “Tax Cuts and Jobs Act” (H.R. 1), during the week of 21 December 2017. The Bill was forwarded to President Trump for his signature, who signed it into law on 22 December 2017.

• Mandatory tax on tax-deferred foreign earnings: The Conference Agreement provides for a one-time transitional tax on 10% or more U.S. shareholder’s pro rata share of a foreign corporation’s post-1986 tax-deferred earnings. The tax rate is 15.5% on earnings attributable to cash and cash equivalents and other short-term assets and 8% on remaining assets.

• Base erosion: A minimum tax equal to “base erosion minimum tax amount” would be imposed on “base erosion payments” paid or accrued by a taxpayer to a foreign related person. Base erosion minimum tax amount would be the excess of 10% (for tax years beginning before 31 December 2025, and 12.5% thereafter, but 11% and 13.5% for banks and registered securities dealers) of the modified taxable income of the taxpayer for the tax year over the taxpayer’s regular tax liability.

n/a

3 CFC’s • See Action Point 2. n/a

4 Interest deductions • See Action Point 2. n/a

5 Harmful tax practices • No specific action taken yet, as the US does not follow OECD. n/a

6 Prevent treaty abuse• On 17 February 2016, the U.S. Treasury Department released a revised Model Treaty which is the baseline

text when it negotiates tax treaties. In the preamble, the 2016 Model Treaty incorporates recommendations of action point 6.

n/a




7 PE status • No specific action taken yet, as the US does not follow OECD. n/a

8 TP - intangibles • No specific action taken yet, as the US does not follow OECD. n/a


• No specific action taken yet, as the US does not follow OECD. n/a



11 BEPS data collection • No specific action taken yet, as the US does not follow OECD. n/a




• Final CbC Regulations were issued in June 2016 designed to coordinate with the model CbC reporting template and instructions as per Action Item 13. The CbC information will be reported on new Form 8975 for periods beginning on or after 30 June 2016 and will be required for Ultimate Parent Entities of Multinational Enterprise groups that had on a consolidated basis, revenue of $850 million or more in the immediately preceding reporting period. IRS will allow voluntary filings called a “parent surrogate filing” for an earlier period to conform with the OECD start date.

• On 6 April 2017, the US Internal Revenue Service published two model competent authority agreements (CAAs) for the exchange of CbC reports. One CAA is based on the double tax convention and the other arrangement is based on a TIEA.

• In June 2017, the IRS has published 5 CAAs signed by the US and Iceland, the Netherlands, New Zealand Norway and South Africa

• The US Treasury Department issued revised interpretative guidelines in the first week of November 2017 to assist businesses in preparing required transfer pricing documentation.

n/a

14 Dispute resolution • No specific action taken yet, as the US does not follow OECD. n/a

15 Multilateral instrument • No specific action taken yet, as the US does not follow OECD. n/a

159



Country Uruguay PKF member firm PKF México

























• Uruguay is one of the 72 signatories of the MLI. The MLI, which has been signed on 7 June 2017, offers concrete solutions for jurisdictions to close the gaps in their existing bilateral DTTs. It also implements agreed minimum standards to counter tax treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies.

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www.pkf.comTAXBEPS-DEC17


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