Tax Management

Singapore: Multilateral Convention on BEPS signed

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Singapore has signed the multilateral instrument on 7 June 2017, aiming to facilitate the implementation of tax related measures to Prevent Base Erosion and Profit Shifting (MLI).

Singapore intends for the Multilateral Instrument to apply to Double Taxation Agreements with treaty partners that are members of the Ad Hoc Group, and this would put the treaties to be in line with international standards and increase access to benefits such as certainty and efficient dispute resolution mechanisms. The agreed changes to each DTA will enter into force after the Multilateral Instrument has been ratified by Singapore and the treaty partner.

Singapore will work towards the ratification of the Multilateral Instrument at the earliest possible date. Clarification of the changes to each DTA will be provided to the taxpayer by the Inland Revenue Authority of Singapore website.

Ireland: DAC2/CRS return deadline extended

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The Irish revenue has delayed the filing deadline for DAC2/CRS returns until 18 August 2017. As the opportunity to begin filing is delayed, revenue reminds customers that the Registration facility for DAC2/CRS is still fully operational and customers should ensure that they register as soon as possible if they have not already done so.

India: Issues first comprehensive report on APA

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On May 1, 2017, the first annual report on APA programme was released by the Central Board of Direct Taxes (CBDT) which provides various statistical and qualitative aspects of the Indian APA program to promote discussions and discussions between taxpayers, policy-makers, media, economists and the like Weaknesses of the program.

India has signed six bilateral advance pricing agreements with the U.K. and five with Japan since 2012 when the country began offering the agreements that allow companies to avoid a transfer pricing audit in one or more countries, the government said in its first annual APA report.

The analyses of the report discussed below:

  1. APAs can be unilateral, bilateral or multilateral. Over the last five years, 815 APA applications were filed as of 31 March 2017 (688 applications for unilateral APAs and 127 bilateral APA applications).
  2.  On the average, India has concluded unilateral APAs in 29 months and bilateral APAs in 39 months.
  3. Substantial coverage of unilateral APAs is with respect to the service sector. This reflects the fact that the service sector is the largest contributor to India’s Gross Domestic Product and is also at the forefront of India’s international trade.
  4. The statistics further show that as many as 29 types of international transactions are covered in the unilateral APAs. A total of 292 international transactions has been included in the 141 unilateral APAs.
  5. The transaction net margin method has been used in 70% of the unilateral cases and 90% of the bilateral cases.
  6. The APAs have covered transactions with 118 countries where the affiliates of the Indian applicants are located. This reflects the truly global reach of multinational enterprises. Not surprisingly, the US tops the list and finds its entities in 93 APAs.

The Indian APA program has matured over the last five years and the number of agreements signed is a testimony to this. Complex settlement pricing problems, which were prone to lengthy legal disputes, are increasingly solved by APAs. The resolutions are for both the taxpayer and the government. While the taxpayers have managed to secure security for five or nine years (depending on whether rollback provisions are applicable to an agreement), the government has been able to shift resources from audit and process processes to a more productive work.

India: CBDT signs four more unilateral APAs

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On 6th February 2017, the Central Board of Direct Taxes (CBDT) has signed four more unilateral advance pricing agreements (APAs) with Indian taxpayers in order to reduce litigation by providing certainty in transfer pricing.

The international transactions covered in these agreements include software development Services, IT enabled Services (BPOs), Engineering Design Services, Contract R&D Services and Marketing Support Services.  With these four signings, the total number of APAs entered into by the CBDT has reached 115. This includes 7 bilateral APAs and 108 Unilateral APAs till date.

OECD: Guidance on implementation of the Common Reporting Standard

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On 6 April 2017 the OECD released further information to support the consistent implementation of the Common Reporting Standard (CRS). This guidance includes a series of additional frequently asked questions (FAQs) related to the CRS and the second edition of the Standard for Automatic Exchange of Financial Account Information in Tax Matters. The OECD has also set out additional technical guidance on how to handle corrections and cancellations within the CRS XML Schema, as well as a revised and expanded set of correction examples.

Indonesia: New regulation on exchange of information

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The Indonesian Minister of Finance issued Regulation No. 39/PMK.03/2017 of 3 March 2017 on the exchange of information as required under the international agreements entered into by the government including tax agreements, tax information exchange agreements, multilateral or bilateral competent authority agreements, the Convention on Mutual Administrative Assistance in Tax Matters, and intergovernmental agreements.

The regulation sets out, inter-alia, the information that could be released, conditions for the release of information requested and the reporting requirements of the reporting entities. The information could be exchanged through formal requests to the competent authorities, voluntarily or through automatic periodical reporting.

Pakistan: FBR issues rules for common reporting standard

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The Federal Board of Revenue issued SRO 166(I)/2017 on 15 March 2017, amending the Income Tax Rules 2002 by inserting Rules 78A to 78J to implement the Common Reporting Standard for financial institutions for the automatic exchange of information with OECD member countries. The draft amendments were released to the public for comments via SRO 101(I)/2017 of 17 February 2017.