- UK Urged To Drop Plan To Extend Offshore Tax Limitations Period 29th November 2018
The UK Parliament’s Economic Affairs Finance Bill Sub-Committee has proposed that provisions should be stripped from the Finance Bill that would extend the time limit on assessing offshore tax to 12 years. Currently the limit is four years. This can be extended to six years where a taxpayer has failed to take reasonable care, and to 20 years in cases where there is deliberately non-compliant behavior amounting to fraud. In a letter to the Chancellor on November 6, 2018, the chair of the Committee, Lord Forsyth of Drumlean, outlined the Finance Bill Sub-Committee’s interim conclusions on the draft Finance Bill 2018. It is due to table a report for parliamentary consideration shortly. In its letter to the Government, the Sub-Committee said: “There was deep and consistent opposition to this measure from witnesses to our inquiry, primarily because the impact would extend beyond the high net worth individuals at whom one might expect it was targeted. The Low Incomes Tax Reform Group were concerned that many individuals affected by clauses 33 and 34 would be elderly people on low incomes. They, together with several other witnesses, suggested the measure be withdrawn, or at least replaced by something more proportionate and targeted.” It noted that: “The only reason given for the extension in the consultation document was that offshore matters are complex and take a long time to resolve. Witnesses disagreed with this assertion.” “Pinsent Masons LLP noted that while a ‘complex offshore structure’ may cause delay, the powers would also apply where there was no complexity, or where only a small amount of tax is at stake.” It said: “‘Offshore’ does not equal complexity in the drafting of this measure: having a holiday home, shares in an overseas listed company, an overseas bank account, or small pension would be enough to bring a taxpayer within its scope.” “This could affect many thousands of taxpayers. Now that the Common Reporting Standard has been adopted by over 100 countries it should be more straightforward for HMRC to obtain any information it needs from overseas tax authorities. It is therefore difficult to understand why this proposal has been brought forward now.” “It is also unclear how the period of 12 years was arrived at. There was no consideration in the consultation of alternative time periods. […] The evidence we received emphasized that [existing] time limits should be sufficient in relation to both offshore and onshore matters.” “The draft prop …
- OECD Releases Guidance On Impact Of BEPS MLI 16th November 2018
The OECD has provided a progress update on implementation of the BEPS multilateral instrument (BEPS MLI), which will become effective from January 1, 2019, and released advice for states on how to prepare guidance on the interpretation of changes to tax treaties.
The BEPS MLI, developed through negotiations involving more than 100 countries and jurisdictions as part of the OECD’s BEPS project, is intended to enable countries to incorporate BEPS-related amendments into their tax treaties without having to renegotiate bilateral treaties on a piecemeal basis – a process that could take more than a decade to achieve.
According to the OECD, the MLI now covers 84 jurisdictions. It will become effective from the beginning of next year for the first 47 tax treaties concluded among the 15 jurisdictions that deposited their acceptance or ratification instrument.
The OECD has released new guidance in “Guidance for the Development of Synthesised Texts.” These synthesized texts are intended to present a clear overview of the modifications to tax treaties resulting from the BEPS MLI. They are intended to provide comprehensive information to taxpayers, auditors, advisors, and other users on when the modifications will have effect in each jurisdiction.
Several jurisdictions have already started preparing synthesized texts on the basis of the guidance, taking into account their own publication requirements and practices. In September, Poland was the first jurisdiction to publish synthesized texts. The guidance is intended to ensure that governments can prepare these texts in a consistent manner.
Further, the OECD has issued a Secretariat note, which is intended to clarify the entry into effect rules for tax treaties of jurisdictions that deposited their ratification instruments last September.
The OECD said: “The Guidance and the Secretariat note are the most recent additions to a wide range of existing tools and background documents, including the popular MLI Matching Database. The OECD is also expanding the functionality of the database to include information on entry into effect. The new tools will be presented during a Webcast on the MLI scheduled for December. Information on timing and registration will be made available in due course.”
- OECD Releases Seychelles TP Guidance 1st October 2018
This month the OECD released a guide on the transfer pricing policies in place in Seychelles.
The guidance is in the form of a Transfer Pricing Country Profile, which the OECD prepared based on answers received from the domestic tax agency, as part of its work to support taxpayers to come to terms with transfer pricing changes that have been made, or are being proposed, in response to its recommendations on tackling base erosion and profit shifting.
BEPS refers to tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations. The BEPS package provides 15 Actions to equip governments with the domestic and international instruments needed to tackle BEPS, by ensuring that profits are taxed where economic activities generating the profits are performed and where value is created.
Having released these reports, the OECD launched the BEPS Inclusive Framework, of which Seychelles is a member, within which over 100 countries and jurisdictions are collaborating to implement the BEPS measures and tackle BEPS.
As a member of the Inclusive Framework, Seychelles has agreed to remove any “harmful” tax provisions from in its domestic tax regime, amend its tax treaty rules to prevent treaty abuse, implement country-by-country reporting rules and exchange the reports it receives from multinationals with other countries, and work with other BEPS Inclusive Framework members to improve cross-border tax dispute resolution mechanisms.
The new guidance on Seychelles’ transfer pricing regime is in the form of answers to frequently asked questions, covering 29 areas of the territory’s regime. The tax agency in its answers has provided citations to the relevant legislation with hyperlinks.