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The United Nations (UN) is stepping up its role in international tax policy, aiming to create a new framework for global tax cooperation.
Historically, organisations like the Organisation for Economic Co-operation and Development (OECD) have led the way in setting international tax standards.
However, the UN’s involvement signals a shift towards giving developing countries a stronger voice in shaping tax rules, particularly as digitalisation and globalisation have created new challenges for traditional tax systems.
The UN’s new framework is expected to focus on improving tax cooperation between countries, addressing issues like tax evasion, and ensuring fair taxation of multinational corporations.
The global tax system is under increasing strain. Large multinational companies, especially in the tech sector, often pay very little tax in the countries where they generate profits.
This is largely due to tax avoidance strategies that involve shifting profits to low-tax jurisdictions.
While developed countries have been trying to address this issue through initiatives like the OECD’s Base Erosion and Profit Shifting (BEPS) project, developing countries argue that they have been left out of the conversation.
The UN believes that a new framework could help level the playing field for developing nations, allowing them to claim their fair share of tax revenues.
This is particularly important as many developing countries rely on corporate tax revenues to fund public services.
The UN’s proposed global tax framework is expected to focus on several key areas:
While the UN’s push for a new global tax framework is ambitious, it faces several challenges.
For one, many developed countries, particularly those in the OECD, are already working on their own tax reforms, including the global minimum tax under Pillar Two.
Some may be reluctant to give the UN a bigger role in tax matters, fearing that it could complicate or slow down existing efforts.
Moreover, multinational companies may push back against any rules that significantly increase their tax burden.
Countries with low tax rates, like Ireland or certain Caribbean nations, may also resist changes that could hurt their status as attractive locations for businesses.
The UN’s involvement in creating a new global tax framework is a sign that the world is recognising the need for more inclusive tax policies.
As the global economy becomes increasingly digital and interconnected, it’s important that all countries—especially developing ones—have a say in how taxes are collected.
If successful, the UN’s efforts could lead to a fairer and more transparent international tax system, where corporations contribute their fair share and countries can cooperate more effectively to combat tax evasion.
If you have any queries about this article on the United Nations New Global Tax Framework, or other international tax matters, then please get in touch.
Singapore is a major hub for international business, with many multinational companies setting up regional headquarters there.
To ensure that these companies pay their fair share of taxes, Singapore has strict transfer pricing rules. These rules govern how companies set the prices for transactions between their subsidiaries in different countries.
In 2024, the Inland Revenue Authority of Singapore (IRAS) updated its transfer pricing guidelines to reflect the latest international standards.
The updated guidelines include several key changes:
For multinational companies operating in Singapore, the updated transfer pricing guidelines mean they need to be more diligent in how they document their transactions.
The guidelines are designed to prevent companies from using transfer pricing to shift profits out of Singapore and avoid paying taxes.
The changes also align Singapore’s rules with international standards set by the OECD. This is important because it helps Singapore maintain its reputation as a transparent and compliant tax jurisdiction.
As Singapore continues to update its tax policies, companies operating in the country will need to stay up-to-date with the latest changes.
The updated transfer pricing guidelines are part of Singapore’s broader efforts to ensure that multinational companies contribute their fair share of taxes.
Singapore’s updated transfer pricing guidelines represent a significant step forward in ensuring that companies pay their fair share of taxes.
For businesses, this means more work to ensure compliance, but it also creates a fairer tax system that benefits everyone.
If you have any queries about this article on Singapore Updates Transfer Pricing Guidelines, or any other tax matters in Singapore, then please get in touch.
Corporate tax is the money companies pay on their profits, and it varies from country to country.
Vietnam has recently decided to raise its corporate tax rate for large multinational companies, especially those in the technology and manufacturing sectors like Samsung and Intel.
Vietnam raised its corporate tax because it wants to collect more revenue from the large multinational corporations (MNCs) that operate there.
These companies have been benefiting from Vietnam’s relatively low tax rate for years while earning significant profits from their operations in the country.
By raising the corporate tax, Vietnam hopes to increase the amount of money it collects from these companies. This revenue can be used to improve public services like healthcare, education, and infrastructure.
The tax hike is aimed at the largest multinational companies, especially those in tech manufacturing.
Companies like Samsung and Intel, which have significant operations in Vietnam, are expected to see an increase in their tax bills.
However, smaller companies and local businesses are not affected by the tax increase, as the government wants to continue supporting them.
For large companies, this tax increase could mean they have to rethink their tax planning strategies.
While Vietnam is still an attractive place for manufacturing because of its low labour costs and skilled workforce, companies may now have to factor in the higher tax rate when deciding where to invest.
On the other hand, Vietnam remains competitive compared to other countries in the region, and the government is still committed to attracting foreign investment.
Vietnam’s corporate tax hike for multinationals is part of its broader efforts to collect more revenue from big businesses while still supporting local companies.
For multinational corporations, this means adjusting to a higher tax environment, but Vietnam’s strong manufacturing sector and favourable business conditions will likely keep it as a top choice for investment.
If you have any queries about this article, Vietnam Raises Corporate Tax for Multinationals, or tax matters in Vietnam more generally, then please get in touch.
Corporate tax is the tax paid by businesses on their profits. Some countries, like Gibraltar, have relatively low corporate tax rates to attract companies to set up operations there.
However, due to international tax changes, Gibraltar is considering increasing its corporate tax rate to remain compliant with global standards.
Gibraltar’s current corporate tax rate is 12.5%, one of the lowest in the world. Many businesses choose Gibraltar because of this attractive tax environment.
However, the introduction of the OECD’s Pillar 2 global minimum tax—set at 15%—means Gibraltar might have to raise its tax rate to align with this international rule.
The global minimum tax is designed to prevent companies from shifting profits to low-tax countries to avoid paying taxes.
Countries with tax rates lower than 15% may have to increase them, or other countries where companies operate can “top up” the tax to meet the 15% threshold.
If Gibraltar increases its tax rate, it could still remain competitive compared to other countries, but businesses might have to adjust their tax planning strategies.
Some companies that rely on Gibraltar’s low tax rate might look for other tax-friendly jurisdictions.
On the other hand, by complying with the global minimum tax, Gibraltar will improve its reputation as a transparent and cooperative tax jurisdiction, which could attract more responsible businesses.
Companies currently benefiting from Gibraltar’s low corporate tax rate will need to evaluate how the increase will affect their profits.
They may have to pay higher taxes if the rate rises to 15%.
However, many businesses may find that Gibraltar remains an attractive place to operate, especially because of its other benefits, like a favourable regulatory environment and access to European markets.
Gibraltar’s potential corporate tax rate increase is part of a global shift towards greater tax transparency and cooperation.
While businesses may need to adjust to the new rate, Gibraltar’s continued compliance with international standards will likely strengthen its position in the global economy.
If you have any queries about this article on Gibraltar Considers Corporate Tax Rate Increase, or tax matters in Gibraltar more generally, then please get in touch.
Transfer pricing refers to the rules that govern how multinational companies set the prices for transactions between their subsidiaries in different countries.
These rules exist to prevent companies from artificially lowering their taxable income by shifting profits to low-tax countries.
Brazil is undergoing a major reform in its transfer pricing laws to align itself with international standards, specifically those set by the Organisation for Economic Co-operation and Development (OECD).
The reform aims to reduce tax avoidance by ensuring that companies operating in Brazil pay their fair share of taxes.
In 2024, Brazil passed Law No. 14596, which introduced new transfer pricing rules. These rules are designed to bring Brazil in line with OECD standards and the Base Erosion and Profit Shifting (BEPS) project.
This reform is essential because, historically, Brazil had unique transfer pricing rules that were inconsistent with global norms, which created confusion and made it easier for companies to shift profits.
One of the key changes in the new law is the arm’s length principle. This principle ensures that transactions between related parties (such as a parent company and its subsidiary) are priced as if they were between independent parties.
By applying the arm’s length principle, Brazil hopes to ensure that companies aren’t manipulating prices to reduce their tax liabilities.
The reform has significant implications for companies operating in Brazil.
Under the new rules, companies must provide more detailed documentation to prove that their transfer pricing arrangements comply with the arm’s length principle. Failure to do so could result in hefty fines and back taxes.
For multinational companies, this means they need to review their transfer pricing policies and ensure they comply with Brazil’s new rules.
The reform also creates more work for tax professionals, as they will need to help companies navigate the new requirements.
Brazil’s transfer pricing reform is part of a broader trend towards greater tax transparency and cooperation among countries.
By aligning its rules with OECD standards, Brazil is sending a message that it is serious about cracking down on tax avoidance.
This reform is expected to improve Brazil’s relationships with other countries and make it easier for foreign companies to invest in Brazil.
Brazil’s transfer pricing reform is a significant step forward in the fight against tax avoidance.
By adopting the arm’s length principle and aligning its rules with international standards, Brazil is making it harder for companies to shift profits and avoid taxes.
For businesses, this means more compliance work, but it also creates a fairer tax system.
Final thoughts
If you have any queries about this article on Brazil’s Transfer Pricing Reform, or tax matters in Brazil more generally, then please get in touch.
Non-cooperative tax jurisdictions, sometimes called “tax havens,” are countries or territories that don’t follow international tax rules.
These places can be used by people and companies looking to hide their money and avoid or evade paying taxes.
Argentina has a list of these places, and they keep an eye on which countries are cooperating and which ones are not.
If a country is on Argentina’s list, it means that companies and individuals doing business there might face higher taxes.
In September 2024, Argentina updated its list of non-cooperative tax jurisdictions.
This is something Argentina does regularly to make sure its list is up-to-date. In this latest update, Argentina removed five countries from the list.
By removing these countries, Argentina is saying that these places have started cooperating with international tax rules.
This is a good thing because it means fewer people and companies will be able to hide their money from tax authorities.
When countries cooperate on tax rules, it becomes harder for people and companies to avoid paying taxes. This means that governments can collect more money and use it to fund things like schools, hospitals, and roads.
By updating its list, Argentina is helping to create a fairer tax system, where everyone pays their fair share.
Argentina will continue to monitor other countries and update its list as needed.
For now, companies and individuals doing business with the countries that were removed from the list will have an easier time.
But for those still on the list, the higher taxes will remain in place.
If you have any queries about this article on Argentina Updates List of Non-Cooperative Tax Jurisdictions, or tax matters in Argentina more generally, then please get in touch.
Firstly, what is the Global Minimum Tax?
A global minimum tax is a tax rule that tries to stop big companies from paying very little tax by moving their profits to countries with super low taxes (called “tax havens”).
The idea is that every big company should pay at least a certain percentage of tax, no matter where they are based.
Japan is one of the countries working to put this rule into action. But it’s not easy, and Japan still has a long way to go before it can fully introduce the global minimum tax.
In 2021, Japan agreed with other countries in the Organisation for Economic Co-operation and Development (OECD) to introduce a global minimum tax of 15%.
This means that even if a company is based in a low-tax country, Japan can still charge it extra tax to make sure it’s paying at least 15%.
But agreeing to the tax is just the first step. Japan still needs to pass laws and create systems that can track companies and make sure they are following the rules. This is where things get tricky.
One of the big challenges Japan is facing is making sure it has all the right tools to check how much profit companies are making and where they are making it.
This requires a lot of coordination with other countries, especially because big companies can have hundreds of subsidiaries in different parts of the world.
Another challenge is making sure that Japan’s laws match up with the global rules set by the OECD.
If Japan’s rules are different from those in other countries, it could cause confusion and make it harder to enforce the tax.
Japan is working hard to put all the pieces together, but it will take some time. Experts say that Japan’s full global minimum tax system might not be ready for another few years.
The global minimum tax is a big deal because it helps ensure that big companies pay their fair share of taxes.
For Japan, making sure this tax works is important for protecting its economy and making sure that tax revenue is being used to improve services for everyone.
If you have any queries about this article on Global Minimum Tax in Japan, or any other Japanese tax matters, then please get in touch.
Country-by-country reporting (CbCR) is a tax rule that helps governments keep an eye on big multinational companies.
It makes these companies tell the government where they are earning their money and how much tax they are paying in different countries.
This is super important because some companies try to move their profits to countries with very low taxes (often called “tax havens”) so they don’t have to pay as much tax in the countries where they really make their money.
Recently, the European Union (EU) has been working on updating its CbCR regulations, but there are some parts of the new rules that aren’t clear.
That’s why two big accounting firms, KPMG and PwC, are asking for more clarity.
KPMG and PwC are two of the world’s largest accounting firms. They help big companies understand, follow and plan around tax laws.
With the new EU CbCR rules, these firms are concerned that the way the rules are written might confuse companies, especially when it comes to how they should report their data.
The firms are specifically worried about how companies should use XBRL, a special computer language used for reporting financial data.
The rules say companies must use XBRL, but they don’t explain exactly how, which is where the confusion comes in.
If the rules are not clear, companies might report their information the wrong way. This could lead to misunderstandings with tax authorities, fines, or even legal trouble.
For companies, making sure their tax information is correct is important because mistakes can be very costly.
By asking for clearer guidance, KPMG and PwC hope that the EU will help companies avoid these issues and make it easier for everyone to follow the rules.
The EU is expected to listen to feedback from KPMG, PwC, and other organisations before making any final decisions.
Hopefully, they will take this opportunity to provide clearer instructions on how companies should report their data, especially using XBRL.
Even though this might sound technical, it’s actually really important.
Clearer rules will help big companies follow the law and pay their fair share of taxes.
And when everyone pays their fair share, governments can use that money to provide important services like schools, hospitals, and roads.
If you have any queries about this article on CbCR, or other tax matters in general, then please do get in touch.
When companies earn profits in foreign countries, they often face the possibility of being taxed twice: once in the foreign country and again in their home country.
To mitigate this, tax systems around the world, including in the United States, allow for foreign tax credits (FTCs).
FTCs enable companies to offset the tax paid to foreign governments against their domestic tax liability.
However, claiming FTCs isn’t always straightforward, and a recent US Tax Court ruling has provided much-needed clarity on how companies should approach this complex area of tax law.
The US Tax Court recently ruled on a significant case (Varian Medical Systems, Inc. v. Commissioner), involving Section 245A of the Internal Revenue Code, which deals with dividends received from foreign subsidiaries.
The case hinged on how companies should calculate their foreign-source income, which is critical for determining how much of a foreign tax credit they can claim.
In this particular case, a US-based multinational argued that certain types of income should not be included in the calculation of foreign-source income, allowing them to claim a larger foreign tax credit.
However, the court ruled that all types of income, including those that may seem unrelated, must be factored into the calculation.
The case also highlighted the importance of proper documentation and compliance when claiming FTCs, as even small errors in reporting foreign-source income can lead to significant tax penalties.
For multinational companies, this ruling has far-reaching implications.
The court’s decision makes it clear that companies cannot cherry-pick which types of income to include when calculating their foreign tax credits.
Instead, they must take a holistic approach, ensuring that all forms of foreign income are properly accounted for.
Moreover, the ruling underscores the importance of compliance.
Companies that fail to accurately report their foreign income or that miscalculate their foreign tax credits risk being audited by the IRS and could face significant penalties.
In light of this ruling, multinational companies should take immediate steps to review their foreign tax credit calculations.
This may involve working closely with tax advisers to ensure that all foreign income is properly accounted for and that the company is complying with the latest IRS guidelines.
Companies may also want to invest in better tax reporting systems, especially those with operations in multiple countries.
Having the right technology in place can help streamline the tax compliance process and reduce the risk of errors.
The US Tax Court’s ruling serves as a reminder that claiming foreign tax credits is a complex process that requires careful attention to detail.
Companies must ensure that they are following all applicable tax laws and regulations to avoid costly mistakes.
By staying informed and working with experienced tax advisers, multinationals can minimise their tax liabilities while remaining compliant with the law.
If you have any queries about this article on US Tax Court Clarifies Rules on Foreign Tax Credits, or US tax matters in general, then please get in touch.
Transfer pricing refers to the pricing of goods, services, or intellectual property exchanged between different parts of a multinational company.
For example, if a subsidiary in Italy sells products to a subsidiary in Germany, transfer pricing rules determine the price at which these transactions take place.
These rules ensure that companies don’t manipulate internal prices to shift profits to low-tax countries and minimise their tax bills.
In August 2024, the Italian Supreme Court made a landmark decision regarding transfer pricing that is expected to have significant implications, not only for Italy but also for how other countries enforce their transfer pricing rules.
The case involved a multinational company with subsidiaries in Italy and other European countries.
The company was accused of setting artificially high prices for goods transferred between its Italian subsidiary and subsidiaries in lower-tax jurisdictions.
The Italian tax authorities argued that these inflated prices reduced the profits reported in Italy, allowing the company to pay less tax.
The key issue in the case was whether the company’s transfer pricing arrangements complied with the arm’s length principle, a fundamental rule in transfer pricing law.
This principle states that transactions between different parts of a company should be priced as if they were between independent companies.
The Italian Supreme Court ruled in favour of the tax authorities, finding that the company had violated the arm’s length principle.
The court emphasised that tax authorities should scrutinise transfer pricing arrangements to ensure that companies are not artificially shifting profits out of the country.
The ruling is seen as a victory for tax authorities and a warning to companies that Italy is prepared to take a tougher stance on transfer pricing enforcement.
For companies operating in Italy and beyond, this ruling has important implications:
The Organisation for Economic Co-operation and Development (OECD) has been working on transfer pricing guidelines for years, as part of its Base Erosion and Profit Shifting (BEPS) initiative.
This initiative aims to prevent companies from using tax loopholes to shift profits to low-tax jurisdictions.
Italy’s ruling is in line with the OECD’s efforts to ensure that transfer pricing is applied consistently across different jurisdictions.
As more countries adopt these guidelines, companies will need to pay closer attention to how they price transactions between subsidiaries.
This ruling is a clear signal that transfer pricing enforcement is becoming more robust.
Companies with operations in Italy—or any other country with strict transfer pricing rules—should review their pricing policies to ensure compliance.
Working closely with tax advisers is essential to avoid costly penalties and ensure that transactions are priced in accordance with the arm’s length principle.
If you have any further queries on this article on Italy’s transfer pricing decision, or tax matters in Italy more generally, then please get in touch.