Direct Tax
OECD releases XML schemas to support the exchange of tax information on digital platform seller
[Excerpts from oecd.org, 29 March 2022]
The OECD has released the standardized IT-format to support the electronic reporting and automatic exchange of information collected under the OECD's Model Reporting Rules for Digital Platforms (OECD 2020). These Model Rules require digital platforms to report on the income realized by those offering accommodation, transport and personal services, as well as those selling goods, through the platforms and reporting the information to tax authorities.
The Model Reporting Rules for Digital Platforms were developed in light of the rapid growth of the digital economy and in response to calls for a global reporting framework in respect of activities being facilitated by such platforms, in particular in the sharing and gig economy. The activities facilitated by platforms may not always be visible to tax authorities or self-reported by taxpayers. At the same time, the platform economy also permits increased access to information by tax administrations, as it brings activities previously carried out in the informal cash economy onto digital platforms.
Bahrain and Romania deposit MLI ratification instruments
[Excerpts from oecd.org, 28 February 2022]
Bahrain and Romania have deposited their instrument of approval or ratification for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (Convention or MLI), which now covers over 1800 bilateral tax treaties, thus underlining their strong commitment to preventing the abuse of tax treaties and BEPS by MNEs. For Bahrain and Romania, the Convention will enter into force on 1 June 2022.
On 1 February 2022, over 880 treaties concluded among the 70 jurisdictions which have ratified, accepted, or approved the Convention had already been modified by the Convention. An additional 940 treaties will be modified once the Convention has been ratified by all Signatories.
OECD releases public comments received on the draft rules for tax base determinations under Pillar One Amount A
[Excerpts from oecd.org, 3 March 2022]
On 18 February 2022, as part of the ongoing work of the OECD/G20 Inclusive Framework on BEPS to implement the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalization of the Economy, the OECD invited public comments on the Draft Rules for Tax Base Determinations under Pillar One Amount A to assist members in further refining and to finalize the relevant rules.
The OECD is grateful to the commentators for their input and now publishes the public comments received. The comments can be downloaded from the link provided. In the public comments, stakeholders have primarily suggested the elimination of the cap on restatement adjustments, elimination of book-totax adjustment with respect to policy disallowed expenses; recommended extension of a time period for carrying forward of losses and clarity on ‘business continuity conditions’ for carrying forward of transferred losses in case of eligible business combinations, etc.
Transfer Pricing
TP Compliances gaining prominence in the Middle East
The list of countries adopting TP regulations in the Middle East is getting elongated with Egypt, Saudi Arabia, Qatar, Jordan and now the UAE. In the past few months, these countries have taken steps to streamline their TP provisions by issuing clarifications/ FAQs and so on.
UAE - The UAE Ministry of Finance announced the implementation of a federal corporate tax regime, including TP Regulations, effective for financial years commencing on or after 1 June 2023. These TP rules are expected largely to be in line with the OECD Transfer Pricing guidelines, which would be mandatory and could also be applicable to domestic transactions.
Jordan - With the release of the TP rules in Jordan in June 2021, the Jordanian Income and Sales Tax Department recently introduced the transfer pricing compliance forms and templates in its official language. The various forms/ templates include the following:
- TP Disclosure Form(TPDF (Disclosure of the qualitative and quantitative information relating to related party transactions)
- TP Reconcilement Form (Used while seeking department assistance for claiming corresponding transfer pricing adjustment)
- Country-by-Country Notification Form (consists of five sections providing qualitative information about various entities in the multinational group)
- Country-by-country Report (CbCR) Template – Broadly captures the list of constituent entities along with an overview of the allocation of income, taxes and business activities by tax jurisdictions
- Local File Template
- Master File Template
The TP Disclosure and the countryby- country notification will be due on the date of filing of tax return (which shall be the fourth month following the end of the tax period), while the master file and local file will be due within 12 months from the end of the financial year concerned.
Setting up the right TP policy and maintaining appropriate documentation for the intercompany transactions would be of prime essence for MNEs in Middle East countries, including the UAE. It would be imperative for the MNEs to initiate high-level risk analysis and impact assessment for the intercompany arrangements before the implementation of the new regime.
Thailand: The Thai Revenue Department (TRD) launched the TPDF with additional explanations and Q&A relating to Country-bycountry reporting and clarifications
The TRD provided updates on the notification process for Country-bycountry reporting and clarifications as a part of Q&A. Some of the clarifications on issues included in the Q&A are outlined below:
- Joint Venture required to submit transfer pricing documentation: Applicable if the same falls in the related party definition and exceeds the revenue threshold.
- Dividend Payments: Dividend payments excluded from the TPDF.
- Reimbursements: Reimbursement without mark-up is not required to be disclosed in TPDF.
- Inter-company loan transaction for the purchase of assets from a third party: If assets are not ready for use, interest expense be included in ‘Purchase’ under the column of ‘Purchase of Property, Plant and Equipment.’
It would be imperative for the taxpayers to exceed the threshold for filing the TPDF to review the new explanations and Q&As to be proactively prepared to mitigate risks relating to incorrect or incomplete information inclusions in the TPDF and avoid possible penalty exposure.
Indirect Tax
24 more items added to zero-rate VAT
[Excerpts from gulfnews.com]
The tax authorities of Oman have added 24 food items to the list of zero VAT products. The first article of the decision specifies that barley, corn, wheat, soybeans, as well as bird, poultry and animal feed shall be included.
Suspension of tax on gasoline
[Excerpts from USnews.com]
Following a bipartisan decision by the State lawmakers, the State of Connecticut will temporarily suspend its 25% per gallon excise tax on gasoline in an effort to alleviate pain at the pump for motorists. The gas tax will be suspended from 1 April 2022 to 30 June 2022.
Consultation on potential new Online Sales Tax
[Excerpts from mondaq.com]
The tax authorities around the world have been grappling with finding new ways to tax the digital economy. In this regard, the UK government has launched a consultation on a potential new Online Sales Tax (OST). The government wants to distinguish an OST as a long-term, focused action from other comparable types of taxation, such as the UK's own digital services tax (which taxes revenues generated by social media, search engines and online marketplaces).