Nexdigm

Direct Tax

Vietnam joins Multilateral convention to strengthen its tax treaties

[Excerpts from the VCCI news, 11 February 2022]

Vietnam has officially become the 99th member of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, also known as the Multilateral Instrument (MLI). The Vietnamese Ambassador to France, Dinh Toan Thang, authorized by Foreign Minister Bui Thanh Son, signed the Convention in Paris, France, on 9 February. The MLI, covering over 1800 bilateral tax treaties, offers concrete solutions for governments to close the gaps in existing international tax rules by transposing results from the OECD G20 Base Erosion and Profit Shifting Project (G20 BEPS Project) into bilateral tax treaties worldwide.

OECD invites public input on the draft rules for nexus and revenue sourcing under Pillar One Amount A

[Excerpts from Global Compliance News 10 February 2022]

On 4 February 2022, the OECD published the draft model rules for two of the building blocks of Amount A under Pillar One, namely Nexus and Revenue Sourcing. This is the first extensive publication on Pillar One since the political agreement on the Two- Pillar Solution in the form of the joint statement from the Inclusive Framework dated 8 October 2021. The draft model rules enable an MNE group in the scope of Amount A (i.e., global turnover above EUR 20 billion (or local equivalent) and profitability above 10%, subject to some exceptions; hereafter referred to as a “Covered Group”) to determine its socalled market jurisdictions to which part of the Covered Group’s residual profits will be allocated. It should be noted that the draft model rules are still a work-inprogress and subject to changes. The OECD welcomes comments from the public until 18 February 2022.

Transfer Pricing

Danish Tax Agency issues clarification on transfer pricing documentation requirements – Local File to be now submitted to the Tax Authorities

Denmark has recently introduced transfer pricing documentation rules wherein it is a requirement to submit the transfer pricing documentation on an annual basis to the Tax Authorities in Denmark.

The table below encapsulates the old as well as the new documentation requirements, following changes which were amended in the new guidance published:

Old Requirements	New Requirements
For Financial Years starting before 1 January 2021, the companies which are subject to the transfer pricing documentation requirements are obliged to prepare transfer pricing documentation on an annual basis. Upon request by the Danish Tax authorities the same needs to be submitted by the companies within 60 days.	For Financial Years starting on or after 1 January 2021, the transfer pricing documentation needs to be submitted annually. The same needs to be submitted within 60 days after filing the annual corporate Income-tax return. Under the new rule, the company is required to submit both the Local file pertaining to that company and the Groupwide Master File on an annual basis. If multinational Groups are not able to finalize the Master File in time to meet the deadline, then the Group can request an extension for the Master File submission or use the Master File prepared for the previous financial year as a temporary document if certain requirements are met.

Old Requirements

New Requirements

For Financial Years starting before 1 January 2021, the companies which are subject to the transfer pricing documentation requirements are obliged to prepare transfer pricing documentation on an annual basis.
Upon request by the Danish Tax authorities the same needs to be submitted by the companies within 60 days.

For Financial Years starting on or after 1 January 2021, the transfer pricing documentation needs to be submitted annually. The same needs to be submitted within 60 days after filing the annual corporate Income-tax return.
Under the new rule, the company is required to submit both the Local file pertaining to that company and the Groupwide Master File on an annual basis.
If multinational Groups are not able to finalize the Master File in time to meet the deadline, then the Group can request an extension for the Master File submission or use the Master File prepared for the previous financial year as a temporary document if certain requirements are met.

Penalty for non-compliance:

The penalty for non-compliance is DKK 250,000 (approximately EUR 33,500) per year for each legal entity.
Subsequently, if sufficient transfer pricing documentation is prepared and submitted, the penalty will likely to be deduced to DKK 125,000. Additionally, on an adjustment made to the income by the Danish Tax Authorities, a penalty of 10% may be imposed.

Indirect Tax

Duty-free access to UAE for Indian goods

[Excerpts from The Indian Express]

India and the UAE have signed a Comprehensive Economic Partnership Agreement (CEPA) with the aim of increasing bilateral merchandise trade to USD 100 billion by 2030. Over the next 5-10 years, zero-tariff access for Indian products to the UAE will increase to 97% of UAE tariff lines, equating to 99 percent of India's exports by value.

USA opposes Canada’s digital services tax

[Excerpts from various sources]

The USA has urged Canada to abandon its plan to impose a 3% digital service tax on large businesses, warning that the United States Trade Representative (USTR) would examine all options under bilateral trade agreements and domestic law to retaliate if such a levy is adopted. If this proposal is enacted, it would only come into effect in 2024.

Elimination of Kansas food tax to be deferred till 2024

[Excerpts from Fox4kc.com]

Senate Tax Committee is considering a measure that would repeal the state's 6.5% food sales tax by 2024.

Cut in South Dakota’s Sales tax

[Excerpts from Keloland.com]

Basis a proposal moving through the Legislature, South Dakota’s sales tax is planned to be cut from 4.5% to 4% in the coming two years. It is anticipated that the legislation would call for the tax to be cut to 4.25% on 1 July 2022 and then to 4% on 1 July 2023.

Tax Talk Global Developments