Yesterday, Guernsey, Jersey, and the Isle of Man announced their intention to implement the OECD’s Pillar Two global minimum tax initiative.
The three Crown Dependencies have said that they will implement an “income inclusion rule” and a domestic minimum tax to ensure that large multinational enterprises (MNEs) pay a minimum effective tax rate of 15% from 2025.
Pillar Two is a new set of international tax rules that seek to address the problem of base erosion and profit shifting (BEPS).
BEPS is a practice by which MNEs use complex structures to shift profits to low-tax jurisdictions, thereby avoiding paying taxes in high-tax jurisdictions where the profits are generated.
The income inclusion rule is one of the two main components of Pillar Two. The income inclusion rule requires MNEs to pay a top-up tax in high-tax jurisdictions where their effective tax rate is below the 15% minimum.
The domestic minimum tax is the other main component of Pillar Two. The domestic minimum tax requires MNEs to pay a minimum tax in each jurisdiction where they operate, regardless of their effective tax rate.
The implementation of Pillar Two is a significant development in the global fight against BEPS. The rules are expected to raise billions of dollars in additional tax revenue for governments around the world. The rules are also expected to make it more difficult for MNEs to avoid paying taxes.
The announcement by Guernsey, Jersey, and the Isle of Man to implement Pillar Two is a positive development.
The three Crown Dependencies have a reputation for being tax-efficient jurisdictions. However, they have also been criticized for being used as tax havens by MNEs.
The implementation of Pillar Two will help to ensure that MNEs pay their fair share of taxes in the jurisdictions where they operate.
The implementation of Pillar Two will have a number of implications for MNEs. MNEs will need to review their global tax structures to ensure that they are compliant with the new rules.
MNEs may also need to increase their tax payments in high-tax jurisdictions.
The implementation of Pillar Two is a significant development for the global tax landscape. It will be interesting to see how MNEs respond to the new rules.
The rules will help to ensure that MNEs pay their fair share of taxes in the jurisdictions where they operate.
However, it is important to note that the rules are complex and will require careful implementation.
If you have any queries relating to the three Crown Dependencies’ implementation of Pillar Two, then please do not hesitate to get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.
This article discusses a rather unexpected move by the Australian Treasury to tighten tax rules on multinational corporations operating in the country.
Specifically, the Treasury has proposed changes to the way that companies can deduct interest expenses incurred in capitalizing or buying foreign subsidiaries.
Under current rules, Australian companies can deduct interest on money borrowed onshore to invest in foreign subsidiaries or acquire shares in other companies.
However, the proposed changes would remove the ability to deduct interest expenses for investments that generate non-assessable, non-exempt (NANE) income.
This would effectively repeal a provision that has been in place for the past 20 years.
The proposed changes are part of a wider effort to combat profit-shifting by multinational corporations, and are designed to prevent excessive levels of debt being carried by Australian operations.
The changes were unexpected, as they were not part of previous policy proposals or announcements. They are likely to have significant implications for multinational corporations operating in Australia.
Overall, the article provides a comprehensive overview of the proposed changes and their potential impact on multinational corporations operating in Australia.
If you have any queries about this article, or Australian tax issues or tax matters in general, then please do not hesitate to get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.
On 30 June 2022, the Cyprus Parliament approved amendments to the Cyprus Income Tax Law and new Regulations to introduce Transfer Pricing (“TP”) documentation compliance obligations (Master File, Cyprus Local File, Summary Information Table).
The documentation requirements apply to Cypriot tax resident persons and Permanent Establishments (PE’s) of non-tax resident entities that engage in transactions with related parties. The aim of the new law and regulations is to ensure compliance of covered entities with the arm’s length principle.
In addition, the law has been amended to update the definition of related parties by introducing a minimum 25% relationship threshold relevant for companies.
The law amendments and Regulations are effective from the tax year 2022 onwards.
The new transfer pricing law and regulations cover all types of transactions between related parties in excess of €750.000 per category of transaction.
Different types of transactions include sale/purchase of goods, provision/receipt of services, financing transactions, receipt/payment of IP licences/royalties, others.
A relevant notification has been issued by the Cyprus Tax Department (“CTD”) providing (amongst others) the required detailed contents of the Master File and Cyprus Local File.
The Summary Information Table (SIT) must be prepared by all taxpayers that engage in Controlled Transactions on an annual basis, disclosing details regarding such transactions. There is no threshold for the SIT, and this must be submitted electronically together with the Income Tax return for the relevant tax year.
The following exemptions shall apply:
A person who holds a Practicing Certificate from the Institute of Certified Public Accountants of Cyprus (ICPAC) or another approved by the Council of Ministers body of certified auditors
in Cyprus is expected to perform a Quality Review of the Cyprus Local File.
The TP Documentation File must be prepared on an annual basis, by the deadline of filing the Income Tax Return for the relevant tax year.
In case of late submission or non-submission of files, the law and regulations prescribe the following penalties:
| Non-submission of Table of Summarized Information within deadline | € 500 |
| Late filing of the Local &/or Master File: | |
| – within the 61st and 90th day from request | € 5,000 |
| – within the 91st and 120th day from request | € 10,000 |
| – after the 121st day from request or non-filing | € 20,000 |
If you have any queries about this Cyprus Transfer Pricing update, or Cyprus tax matters generally, then please do not hesitate to get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.
Malta has recently published legislation that implements Transfer Pricing Rules into Malta’s tax code (“TP Rules”).
The TP Rules apply to transactions entered into on or after 1st January 2024 as well as pre-existing ones if they are materially altered on or after that date.
The TP Rules will apply when calculating a company’s tax base derived from “cross-border arrangement” between “associated enterprises”. They will apply where associated enterprises have more than 75% (directly or indirectly) of participating rights.
This is reduced to 50% where the entity is a Multi-National Enterprise (“MNE”).
SMEs, as defined in the State Aid Rules, do not fall under these rules.
The term “MNE group”, as used in these Rules, refers to a multinational enterprise (or other entity) whose tax residence(ies) or permanent establishment(s), within and outside of Malta, exceeds 75 million Euro per year.
The TP Rules don’t apply to cross-border transactions with an aggregate arm’s length value of €6m and €20m revenue and capital respectively.
The TP Rules will apply to cross-border transactions and arrangements taking place between:
The TP Rules provide for a deeming provision that, where the actual amount differs from an arm’s-length amount under cross-border arrangements, the latter figure shall be used in ascertaining total income instead of the former.
It is anticipated that more detailed guidance will be issued in due course.
Amongst other things, it is expected that this will include reference to the OECD Transfer Pricing Guidelines.
If you have any queries about this article on Malta Transfer Pricing Rules or Malta tax matters in general, then please do not hesitate to get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article