Tax Talk
Global Developments

Direct Tax

OECD release public comments on Tax Certainty for Issues related to Amount A under Pillar One

[Excerpts from oecd.org, 27 May 2022]

A central element of Amount A is an innovative Tax Certainty Framework for Amount A, which guarantees certainty for in-scope groups over all aspects of the new rules, including the elimination of double taxation. This eliminates the risk of uncoordinated compliance activity in potentially every jurisdiction where a group has revenues, as well as a complex and time-consuming process to eliminate the resulting double taxation. The Tax Certainty Framework incorporates a number of elements designed to address different potential risks posed by the new rules.

A Scope Certainty Review, to provide an out-of-scope Group with certainty that it is not in-scope of rules for Amount A for a Period, removing the risk of unilateral compliance actions. An Advance Certainty Review, to provide certainty over a Group’s methodology for applying specific aspects of the new rules that are specific to Amount A, which will apply for a number of future Periods.

Furthermore, a tax certainty process for issues related to Amount A will ensure that in-scope Groups will benefit from dispute prevention and resolution mechanisms to avoid double taxation due to issues related to Amount A (e.g. transfer pricing and business profits disputes), in a mandatory and binding manner. An elective binding dispute resolution mechanism will be available only for issues related to Amount A for developing economies that are eligible for deferral of their BEPS Action 14 peer review and have no or low levels of Mutual Agreement Procedure (MAP) disputes.

Senegal deposits ratification instrument for MLI

[Excerpts from oecd.org, 10 May 2022]

On 22 March 2022, interested parties were invited to provide comments on the Crypto-Asset Reporting Framework and Amendments to the Common Reporting Standard. The OECD is grateful to the commentators for their input and now publishes the public comments received.

On 1 June 2022, over 880 treaties concluded among the 74 jurisdictions which have ratified, accepted or approved the BEPS Convention will have already been modified by the BEPS Convention. Around 940 additional treaties will be modified once the BEPS Convention has been ratified by all Signatories.

Republic of Congo joins Global Forum as 165th member

[Excerpts from oecd.org, 20 June 2022]

The Republic of the Congo (Congo) joins the international fight against tax evasion by becoming the 165th member – and 34th African member – of the Global Forum on Transparency and Exchange of Information for Tax Purposes. The country’s decision to join the Global Forum was made public on the last day of the 11th meeting of the Africa Initiative, which was held in Nairobi, Kenya, from 14 to 16 June 2022.

Members of the Global Forum include all G20 countries, all OECD members, all international financial centers and a large number of developing countries.

Like all other members, Congo will participate on an equal footing and is committed to combatting offshore tax evasion through the implementation of the internationally agreed standards of Exchange of Information on Request (EOIR) and Automatic Exchange of Information (AEOI).

The Global Forum is the leading multilateral body mandated to ensure that jurisdictions around the world adhere to and effectively implement both the exchange of information on request standards and the standard of automatic exchange of information. These objectives are achieved through robust monitoring and a peer review process. The Global Forum also runs an extensive capacity-building program to support its members in implementing the standards and help tax authorities make the best use of cross-border information sharing channels.

Transfer Pricing

New Jersey: Transfer Pricing settlement initiative program announced to expedite resolution of corporate intercompany pricing disputes

Commencing on 15 June 2022 and continuing through 2 March 2023, the New Jersey Division of Taxation (DoT) has implemented a voluntary initiative for corporate taxpayers incorporated in the state of New Jersey (taxpayer) to reduce and expedite the dispute resolution process for Intercompany Pricing Issues (IPI) and provide an efficient dispute resolution to the corporate taxpayers for all open tax years. The program is introduced to provide certainty and uniformity to taxpayers.

Scope and eligibility

The benefit of the initiative can be availed by all the corporate taxpayers (having filed their corporate income tax returns) who have entered into intercompany transactions that are subject to adjustment under the applicable laws. Eligible taxpayers include:

• taxpayers who are currently under audit;
• taxpayers notified of upcoming audit;
• taxpayers having pending appeals before the Conference and Appeals Branch; and
• unidentified taxpayers who have related party intercompany pricing in place.

The initiative would not be applicable to any pending cases of the taxpayer under litigation in any of the stages not covered above. Furthermore, it is not mandatory for the taxpayer to participate in all the open years. A taxpayer may participate in as many years as they choose.

Steps for application under the initiative

• In order to opt for the initiative, by 15 September 2022, the taxpayer must provide written confirmation to participate in the initiative by completing and emailing the Election to Participate form¹⁷ to TaxationTPInitiative@treas.nj.gov.
• To participate in the initiative, it is imperative for the taxpayer to comply with all of the following terms and conditions:
  • The taxpayers are expected to fully cooperate and furnish all the required transfer pricing, tax, and financial information and documentation to the revenue authorities by 31 October 2022.
  • Time-limit for accepting the proposal offered by DoT is 30 days, wherein the taxpayers may offer modifications or adjustments to the proposal within this time frame.
  • Discretionary extension to this 30-day timeline to be allowed on a case-to-case basis.
  • The proposed adjustment is finalized post-signing of the Closing Agreement¹⁸.
  • The taxpayer shall pay all New Jersey tax and interest as determined under the Closing Agreement.
  • Rights to review or refund of any amounts paid for the covered period will be waived off under this initiative.

For taxpayers who successfully complete the pre-requisite terms and conditions of the said initiative, DoT shall propose a settlement amount and methodology based on information provided and principles prescribed under Internal Revenue Code. The settlement amount shall be mutually agreed upon by the parties and shall be open to all tax years, including the current year under audit. Furthermore, the DoT shall attempt to amicably settle any corporate tax issues for the tax periods covered by this initiative and waive off all applicable penalties, all rights to assess any additional tax, interest or penalties except for adjustments relating to federal corrections for all settled tax types.

Consequences of not participating

For taxpayers who do not opt for the initiative by 15 September 2022 or do not successfully complete the initiative, the revenue authorities shall assess the applicable penalties, not waive any penalties and conduct an audit as per the regular schedule without giving any relief for any unaudited open tax years.