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Following negative media attention in light of the ‘Panama Papers’ scandal, as well as an increase in shareholder litigation in jurisdictions like the US, global tax regimes are in the spotlight. Corporate tax planning and ‘tax avoidance’ have become significant global issues. Many global tax regimes are being revised. The introduction of the Organisation for Economic Co-operation and Development’s (OECD) base erosion and profit shifting (BEPS) project will have a significant impact, given its focus on tax avoidance strategies. The BEPS initiative is driving new legislation across the globe. Equally, the European Union’s Anti-Tax Avoidance Directive II has played an important role. Across Europe, governments are also looking to simplify their tax rules, particularly those governing cross-border operations, with the hope of attracting foreign investment.

UNITED STATES

Nate Carden

Skadden, Arps, Slate, Meagher & Flom

“On many fronts, the most significant policy development in the US in the last 12 months was the 2016 election. The election of president Trump, along with the continuing Republican majority in both the Senate and House of Representatives, appears to have significantly increased the likelihood of fundamental US corporate, or at least international, tax reform. Moreover, the administration appears to be re-examining the US’ posture with respect to trade agreements, which is also influencing the direction of US tax policy. This has led to more serious discussion of the House Republican proposal, known as the Destination-Based Cash Flow Tax, which has some features similar to a value-added tax.”

CANADA

Alex Smith

Grant Thornton

“From a global tax perspective, the OECD Basis Erosion Profit Shifting (BEPS) initiative has taken centre stage with regard to driving new legislation. Canada is no different, although over the past 12-18 months, the Department of Finance has taken a measured approach to introducing legislation to address perceived abuses and to harmonise current practices to the new global standard. Directly addressing BEPS, the Ministry of Finance pledged to adopt the minimum standard, as provided in Action 6 with respect to Treaty Shopping, pledged its commitment to the exchange of income tax rulings with other participating countries, pledged its commitment to the multilateral instrument and introduced legislation to adopt country-by-country reporting.”

MEXICO

Alejandro Barrera

Basham, Ringe y Correa

“Some of the most relevant key developments relating to corporate tax relate to outsourcing activities, tax incentives and oil & gas. Insourcing and outsourcing activities have been strongly regulated and are highly scrutinised by tax, labour and social security authorities. The reason for this is that for the last decade, irregular outsourcing companies have been used for evasion purposes. Unfortunately, the measures taken have affected not only those unscrupulous outsourcing companies but also respected and compliant companies. Since 2014, a few tax incentives have been repealed in Mexico. However, since 2016, several tax incentives have been granted to taxpayers.”

BRAZIL

Alexandre Gleria

ASBZ Advogados

“Brazil, despite not being a formal Organisation for Economic Cooperation and Development (OECD) member, but rather a collaborative country, has been adopting several of the organisation’s recommended guidelines and practices for promoting tax transparency. These include country-by-country reporting and the identification of the final beneficial owner of some international corporate structures. With respect to local initiatives, Brazil is currently discussing several reforms, including a simplification of indirect taxation. After the impeachment of the former president, in order to reduce the public deficit, the Brazilian government has polarised the discussion into two aspects, namely, raising the tax burden and cutting expenses.”

CHILE

Joseph Courand

Deloitte Chile

“In the past 18 months, several developments have taken place, all of which relate to the extensive tax reform approved by Congress in 2014. After the enactment of the 2014 Tax Reform, several flaws and inconsistencies were detected which, if not corrected, would jeopardise its actual and full implementation by 2017. As a result, Congress approved a reform to the Tax Reform, with the objective of simplifying and improving it. Also, the Chilean IRS has been issuing several general rulings interpreting the new provisions. Therefore, a strong recommendation for Chilean taxpayers, and for multinationals operating in Chile, is to study and understand the new provisions in order to avoid mistakes on the tax positions that they may take when preparing their tax returns.”

CURAÇAO

Bryan Irausquin

Ernst & Young Dutch Caribbean

“Curaçao, historically, has been a financial centre with an infrastructure that is favourable to attracting foreign investment. In line with the worldwide trends for increased transparency and a base erosion and profit shifting (BEPS)-proof tax regime, Curaçao has enacted legislation that meets Organisation for Economic Co-operation and Development (OECD) requirements, while maintaining an attractive business environment. For example, transfer pricing documentation requirements have been enacted into law, requiring companies to maintain a minimum level of documentation in the administration in the event of transactions and agreements between related parties.”

UNITED KINGDOM

Vimal Tilakapala

Allen & Overy

“There has been a series of changes, and proposed changes, to core parts of the UK corporate tax system over the past year. The volume of change has been enormous. Key changes include proposals to limit the amount of interest – and similar financing costs – that can be deducted in computing profit for corporation tax, proposals to restrict the amount of tax losses that companies can carry forward to set off against taxable profit for a period, and the introduction of measures effectively targeting domestic and cross-border hybrid arrangements which, broadly, give rise to tax deductions for one person but no corresponding taxable income for another or more than one deduction for the same expense.”

IRELAND

Lorraine Griffin

Deloitte Ireland

“Ireland’s most recent Finance Act was enacted on 25 December 2016. The effect of the change to the securitisation law brought about by the Finance Act 2016 is to treat the holding and managing of assets held by a securitisation vehicle that derive their value or the greater part of their value directly or indirectly from Irish land and property as a separate business within the vehicle. With certain exceptions applying, this means apportioning income, profits, gains and expenses to that separate business on a just and reasonable basis and restricting the deduction for profit participating interest allocated to such business.”

NETHERLANDS

Mario van den Broek

RSM Netherlands

“The OECD Base Erosion and Profit Shifting (BEPS) Action Plan has been very influential over the last 18 months. Exchange of information has been an important development, and this theme has been reflected in various ways. The most obvious theme parties have been dealing with has been country-by-country reporting (CbCR), but other outlets, such as as the exchange of advance tax rulings, have also been fully on the radar of the Dutch tax authorities. The Dutch tax authorities have been working hard to meet their deadlines but given the large number of rulings issued, they have had to ask for a further extension.”

GERMANY

Marko Gründig

KPMG in Germany

“First, the German tax authorities have made substantial progress with digitisation. While it will be some time before compliance processes go fully paperless, enterprises should take the time to examine their own internal processes. Transitioning to digital will certainly improve tax management, since it allows for better documentation, monitoring and information exchange. Second, the level of transparency is steadily increasing. As of this year, for example, Germany is taking part in the automated exchange of tax rulings with other OECD member states. In response to the ‘Panama Papers’ affair, the German government is also looking to increase disclosure requirements for taxpayers and financial institutions.”

AUSTRIA

Rudolf Krickl

PricewaterhouseCoopers Limited

“During the last 12-18 months, several tax measures were published aiming at stimulating investments of mid-sized and large companies in 2017 and 2018. For example, an investment premium of 15 percent for mid-sized and 10 percent for large companies. Also the Austrian research and development (R&D) premium, which is based on the international nexus approach, will be increased from 12 to 14 percent as of 2018. Furthermore, there have been a number of important developments in the field of international tax law.”

ITALY

Luca Bosco

Studio Tributario e Societario

“Italy has introduced significant legislative changes over the last 12-18 months aimed at simplifying tax rules for cross-border business in both inbound and outbound scenarios, as well as providing certainty of tax rules to attract foreign investments. Generally, it is worth noting that from 2017 the corporate tax rate will be reduced to 24 percent, while the notional income deduction will be set at 2.3 percent. Furthermore, a new set of tax incentives has been implemented in order to stimulate the investments, as, for instance, an extra 150 percent depreciation deduction for new assets acquired to support the automation and technological transformation of enterprises, or enhancement of the R&D tax credit, which is extended through 31 December 2020 and increased up to 50 percent.”

JAPAN

Joachim Stobbs

Ernst & Young Tax Co.

“Japan is gradually shifting its tax burden from direct to indirect taxes. Over the past 18 months, Japan’s corporate income tax rate has decreased from 32.11 percent to 29.97 percent in certain cases, along with more tax incentives and benefits for R&D and employment expenses. The corporate tax rate had previously been over 35 percent. Consumption tax is expected to increase from 8 to 10 percent in 2019. Concurrently, there has also been an increase in compliance measures in part due to the increase in regulatory investigations.”

AUSTRALIA

Peter Feros

Clayton Utz

“At the legislative level, we have seen the enactment of the multinational anti-avoidance law (MAAL) and the diverted profits tax (DPT). Both the MAAL and the DPT apply to groups with global revenue of at least AU$1bn. Another example of this focus is the government’s planned implementation of OECD hybrid mismatch rules. We have also seen the Foreign Investment Review Board (FIRB)impose a standard set of tax conditions which must be satisfied on applicable transactions, in order for the investment to be approved. In this regard the Australian Taxation Office (ATO) is consulted by FIRB in advance of such approval being provided so that the involvement of the ATO on the largest cross-border transactions is truly on a ‘real time’ basis.”

KENYA

Peter Kinuthia

KPMG Kenya

“One of the most important developments has been the overhaul of income tax legislation in Kenya which began in 2016 and is expected to end in 2018. The reform aims to simplify the tax code to make it easier for taxpayers to comply and fulfil their tax obligations. Other key developments in Kenya have included: the introduction of an online tax filing and payment platform which covers all the major taxes; the introduction of the Tax Procedures Act, which consolidates all the procedural matters relating to filing of returns, assessment and collection of taxes; the removal of the 5 percent capital gains tax on listed securities; the introduction of a limitation of benefit clause in the domestic tax legislation; and the creation of special economic zones with lower income tax rates to spur growth in target sectors.”

UGANDA

Plaxeda Namirimu

PricewaterhouseCoopers Limited

“Uganda’s income tax rules previously restricted a non-resident who sought to benefit from reduced rates provided by Double Taxation Treaties (DTAs) where 50 percent or more of the underlying ownership was held by residents outside of the treaty country. This restriction conflicted with the concept of ‘beneficial ownership’ as applied in DTAs and posed practical challenges in establishing the underlying ownership of companies in treaty jurisdictions. The new rules effectively address the application of treaty benefits to publically listed companies, entities with economic substance in the treaty country and entities which have beneficial ownership of the relevant income.”

CONGO

Emmanuel Le Bras

PricewaterhouseCoopers Tax & Legal

“Since the takeover of operations by a number of high profile telecoms companies a few years ago, provisions on indirect transfers of shares have been introduced in the general tax code. Declared “tax break year” by the Head of Tax himself, corporate tax legislation saw little change in 2016. In a country where the economy relies almost exclusively on oil production, there is an increasingly urgent need to diversify the national economy.”

CONTRIBUTORS

Allen & Overy

ASBZ Advogados

Basham, Ringe y Correa

Clayton Utz

Deloitte Chile

Deloitte Ireland

Ernst & Young Dutch Caribbean

Ernst & Young Tax Co.

Grant Thornton

KPMG in Germany

KPMG Kenya

PricewaterhouseCoopers Limited

PricewaterhouseCoopers Tax & Legal

RSM Netherlands

Skadden, Arps, Slate, Meagher & Flom

Studio Tributario e Societario