An OECD Tax Talk on 16 October 2018 discussed the latest developments on tax issues.

Tax Challenges of Digitalisation

In March 2018 the Task Force on the Digital Economy (TFDE) sent an interim report to the G20 on the tax challenges of digitalization. The task force also met in July 2018 to discuss new proposals including the possibility of a minimum tax rate. The TFDE is to discuss the proposals at its meeting on 4 and 5 December 2018. Also the Inclusive Framework on BEPS meeting in January 2019 will give some direction to the future work. An update report will be prepared for the G20 in 2019.

BEPS Implementation

All 175 tax regimes examined have been assessed and categorized. Around 16,000 rulings are currently within the scope of the exchange of information on rulings. There have been almost 21,000 exchanges of rulings in 2016 and 2017. The results of peer reviews will be released later in 2018.

Multilateral Instrument to include treaty related BEPS measures into bilateral tax treaties

Currently 84 jurisdictions are covered by the multilateral instrument (MLI) of which 15 have deposited instruments of ratification. More than 1,400 tax agreements have been matched and the preamble and ant-treaty abuse rules have been included in all the matched agreements. 28 jurisdictions have opted for arbitration to be included in the article on the mutual agreement procedure.

Prevention of treaty abuse

Peer reviews are to be carried out under the prevention of treaty abuse under action 6 of BEPS. So far jurisdictions have answered a questionnaire and listed existing tax treaties, indicating if they comply with the minimum standard. The OECD’s working party has prepared a report to discuss with jurisdictions in the autumn and the report will be finalized in December 2018. The report will be presented and discussed at the CFA/IF meeting in January 2019.

Implementation of CbC reporting

More than 79 jurisdictions have implemented a CbC reporting filing obligation. More than 1800 exchange relationships have been activated. The first deadline for exchanges of reports was on 1 June 2018. A CbC reporting risk assessment template will support developing countries. Work on the review of CbC reporting, scheduled for 2020, is to begin later in 2018.

Peer reviews of CbC reporting will focus on updates to domestic law, including those to address recommendations; the exchange framework and timeliness of exchanges; and the appropriate use of CbC reports. From 2019 the aggregated data from CbC reports will be included in the Corporate Tax Statistics dataset.

MAP peer reviews

Four batches of stage 1 peer reviews have been published. Two more batches are ongoing. The MAP statistics for 2017 showed jurisdiction by jurisdiction statistics for the first time. The number of reporting jurisdictions rose to 87, and the coverage by the statistics includes around 99% of MAP cases globally.

Transfer Pricing

The BEPS final reports in 2015 envisaged additional transfer pricing guidance in relation to attribution of profits to Pes (final guidance published in March 2018); profit split method (final guidance published in June 2018); hard to value intangibles (final guidance published in June 2018) and financial transactions (non-consensus discussion draft published in July 2018).

The financial transactions project is challenging. It is difficult to achieve consensus on fundamental issues, such as the role of the arm’s length principle in evaluation capital structure. The non-consensus discussion draft of July 2018 focused on delineation and pricing of financial transactions. It addressed cash pooling, guarantees, captive insurance, hedging and intragroup loans. Public comments were invited, especially for the non-consensus issues, and more than one thousand pages of comments have been received.

The next steps are to find common ground and proceed to publication.

Tax Transparency

Around 100 jurisdictions have commenced automatic exchanges of information (AEOI). An AEOI Implementation Report and G20 Report are expected to be issued in November 2018. The new terms of reference have been finalized and work on methodology is continuing. This will be discussed at the annual plenary meeting of the Global Forum in Uruguay on 20 to 22 November 2018 which will take place alongside an LAC ministerial meeting.

RCI/CBI

A growing number of countries offer citizenship or residence by investment schemes (golden visas). Documentation obtained by the schemes such as IDs, residence permits and other documentation can be misused to misrepresent the individual’s jurisdiction of tax residence. The OECD has analysed more than 100 CBI/RBI schemes offered by jurisdictions committed to the common reporting standard and has published this analysis with guidance for financial institutions. Spontaneous exchange of information with original jurisdictions on users of CBI/RBI schemes is a risk mitigating factor. A dynamic list of high-risk schemes with regular updates will be rolled out to non-AEOI committed jurisdictions.