Buletin Informativ - nr. 13/2018: Top 5 noutati din domeniul fiscalitatii internationale
Issue 3 2018 - Brussels, 30 March 2018
1.OECD Interim Report on Tax Challenges Arising from Digitalisation
The OECD has published its Interim Report on Tax Challenges Arising from Digitalisation, which concludes that no agreement can presently be reached among the Inclusive Framework countries on either the implementation of short-term interim measures to tax the digital economy, or long term measures of identifying characteristics of digital businesses, and the extent to which those features contribute to value creation and should therefore be subject to a digital tax.
However, OECD Inclusive Framework members have agreed to undertake a review of the nexus and profit allocation rules concerning allocation of taxing rights between jurisdictions, and the impact of digitalisation on the economy. To that end, and in order to improve international taxation rules to be better fit for purpose concerning the taxation of the digital economy, the OECD aims to produce a final report in 2020.
2.EU Commission Proposals for Taxation of the Digital Economy
The European Commission has now published draft directives concerning taxation of the digital economy.
- Interim Measure/Directive on DST: Tax on gross revenue
The draft interim measure, the Directive on Digital Services Tax (“DST”) proposes to implement a short term interim turnover tax on digital businesses operating in the Single Market, on the aggregated gross revenue of digital businesses at 3%. The levy would apply to digital firms with global revenue above €750 million, and annual EU revenue of €50 million or more, with no deduction of costs, to apply to revenue made from targeted advertising based on user data collection and digital intermediation services of making available digital marketplaces. Revenue contemplated to be within the scope of the proposed tax includes services of data collection for the sale of targeted advertising, and intermediation services of making available digital marketplaces. The tax would require self-reporting of the relevant data for calculating revenue and place of supply. The tax is proposed to be collected making use of a “one-stop-shop” model.
- Long Term Measures/Digital PE: Revision of International Corporate Tax Concepts
The long term measure proposes revision of corporate taxation concepts of permanent establishment and profit allocation to account for digital activities. The directive proposes that the definition of permanent establishment should include a “significant digital presence”. A digital PE will be established when a platform either exceeds an annual turnover of €7 million, or has more than 100,000 users in a Member State in a taxable year, or has over 3,000 contracts for the provision of digital services in a taxable year, that would amount to a Digital PE.
- Recommendations relating to Double Tax Treaties: The third proposal in the EU digital taxation package sets out recommendations to Member states to renegotiate and adapt their double tax treaties with 3rd countries (non-EU) by way of extending the scope of the PE concept to include significant digital presence (digital PE) through which the business of an enterprise is wholly or partly carried out.
The US recently set out its position that it does not believe digital business is so inherently different such that it warrants separate treatment by way of the creation of a special tax regime and the lack of agreement at OECD level.
3.US Impose Import Tariffs
In early March, US President Donald Trump announced plans to impose a 25% tariff on steel imports, and a 10% tariff on aluminium, in a move to protect and revive the American steel industry. After indications by Canada and the EU, among other countries, that retaliatory measures would be considered, with the EU also making public a list of products upon which tariffs may be imposed, the US have since announced that Canada, Mexico, Europe, Australia, Argentina, Brazil and South Korea will be temporarily exempt from the tariffs. Following the initial announcement of the steel tariff, China announced its own range of tariffs to be imposed on over $3 billion worth of US goods, including fresh fruit, wine and pork. The US has now announced a list of additional tariffs to be imposed on over $60 billion worth of Chinese imports, sparking fears of a so-called “trade war”. Temporary exemptions granted to some countries were conditional on their implementing measures that would assist the US address its trade deficit by 1 May. Negotiations concerning the detail of the measures are ongoing.
4.EU “Blacklist” of Non-Cooperative Jurisdictions
In March, three countries were removed and a further three countries added to the EU’s list of non-cooperative jurisdictions in taxation matters aimed at promoting tax good governance and minimising tax avoidance. Nine countries now remain on the list: American Samoa, Bahamas, Guam, Namibia, Palau, Samoa, Saint Kitts and Nevis, Trinidad and Tobago and the US Virgin Islands.
On 21 March, the Commission also published guidelines identifying countermeasures for the movement of EU funds through countries identified as non-cooperative tax jurisdictions. The guidelines detail the relevant legislation concerning transfers of EU monies in relation to non-cooperative jurisdictions, and provides a framework for assessing the risks of tax avoidance in projects involving entities in these jurisdictions. The legislation requires that EU funds do not support projects that contribute to tax avoidance, and that funding is routing according to good governance taxation standards.
In a significant milestone for the BEPS project, the OECD announced that the BEPS multilateral tax treaty instrument (“MLI”) will enter into force on 1 July 2018. This follows from the deposit of the fifth instrument of ratification by Slovenia. The other ratifying countries are Austria, the Isle of Man, Jersey and Poland. The multilateral tax treaty allows jurisdictions to update their existing double tax treaties and transpose measures agreed in the BEPS project without further need for bilateral negotiations.
Following on from BEPS Action 7 and the changes made to Article 5 of the OECD Model Tax Convention, the OECD has also published a report setting out guidance on how profit attribution rules should apply to permanent establishments. The guidance establishes high-level general principles concerning structures for sale of goods, online advertising and procurement, as well as guidance concerning permanent establishment and attributions of profits arising from anti-fragmentation rules.
Also in March, the OECD published Stage 1 Peer Review Reports assessing tax dispute resolution practices in Czech Republic, Denmark, Finland, Korean, Norway, Poland, Singapore and Spain. The reports examine compliance with best practice standards established in Action 14 of the BEPS plan concerning resolution of taxation disputes. The OECD has also now called for submissions concerning the 5th round of peer reviews relating to Estonia, Greece, Hungary, Iceland, Romania, Slovak Republic, Slovenia and Turkey, to be provided via completion of a taxpayer input questionnaire, with a deadline of 9 April 2018.