Tax Talk
Global Developments

Transfer Pricing

Denmark – CbCR introduced effective for FY commencing 1 January 2025

The Country-by-country reporting (CbCR) legislation is effective from 22 June 2023 (i.e., FYs starting 22 June 2024 or later). Public CbCR would be applicable to the parent company of a multinational group (MNE) if the consolidated revenue for two consecutive FY exceeds DKK 5.6 billion (approx. EUR 750 million). The MNE group should either be European Union (EU) parented or have subsidiaries or branches in the EU.

The parent company will be exempted from filing of CbCR if:

• Its a subsidiary of another parent company that has a qualifying presence in the EU and prepares the report on behalf of the Group;
• Its subsidiaries & branches are all exclusively established in Denmark;
• It is a part of the medium-large sized EU-based Group having a non-EUbased parent company preparing/ publishing the report.

The CbCR would include disclosure of data pertaining to the nature of activities, turnover, profit/loss, tax paid, accumulated earnings, employees, etc., being in alignment with the requirements as per EU directive and Organization for Economic Co-operations and Development (OECD) Guidelines. An option is available with the companies to not to disclose certain sensitive information for a maximum period of five years, subject to providing an explanation for non-disclosure. Such information, however, would be required to be submitted in a separate report.

The public CbCR is required to be prepared and published by the EU-based parent company on its corporate website for a minimum of five years. It is also required to be submitted to the Danish company registry. The report needs to be filed within 12 months from the end of the relevant FY.

In case subsidiaries are exempted from preparing the report on account of the same being prepared by another group entity, currently, there are no provisions relating to the filing of CbCR notification by the subsidiaries. The subsidiaries are required to submit the report on an annual basis, thereby increasing the compliance burden on the subsidiaries on a year-on-year basis.

The EU subsidiaries and branches would be required to prepare CbCR where the EU Member State laws are not applicable to the ultimate parent company and it has not published the report covering the said subsidiaries and branches.

Canada Government seeks consultation from stakeholders to provide clarity on arm’s length principle, issues consultation paper

The Department of Finance with a view to reform and modernize the TP Rules, released a consultation paper ‘Consultation on Reforming and Modernizing Canada’s TP Rules’ to invite comments from the stakeholders which are due by 28 July. The main focus was on the TP adjustment rule 247 of the Income Tax Act (Act) and potential administrative measures.

This is in alignment with the OECD TP guidelines and provides clarity on various technical aspects, which included defining controlled transactions basis the ‘economically relevant characteristics’ of the parties involved and the inclusion of “conditions” in determining the arm’s length principle etc.

The paper also intended to revive certain administrative measures that include:

• standardized template for Local File;
• implementing Master File regulations;
• relief for small taxpayers and low-value transactions with the introduction of simplified documentation requirements, annual reporting schedule, exemptions, etc., based on a threshold or size criteria;
• revisiting the penalty provisions;
• introducing Safe Harbor returns for distributors performing routine activities and low-value-added intragroup services;
• defining the acceptable range with respect to loan arrangements by limiting the term and using credit rating, as well as removing subordination features and embedded options.

Indirect Tax

Taxpayers with taxable revenue exceeding 70 million Saudi Riyals under ‘Phase 2’ of e-invoicing from 1 January 2024

Excerpts from various sources

The Zakat, Tax and Customs Authority (ZATCA) has announced that the sixth group of taxpayers will consist of those with taxable revenue exceeding 70 million Saudi Riyals during 2021 or 2022 to comply with the second phase of implementation of the e-invoicing system. This mandate will start from 1 January 2024.

Swiss VAT Act to undergo revision from 1 January 2025

Excerpts from various sources

The Switzerland Government has passed a new law to amend the VAT Act, which is likely to enter into force from 1 January 2025. Some of the key changes include:

• Electronic platforms facilitating the sale and delivery of goods will be held responsible for VAT on the turnover generated, requiring compliance with a series of conditions. All electronic platforms must furnish information about sellers and buyers as part of their VAT obligations, ensuring transparency in online transactions.
• The purchase of emission rights will be subject to the Acquisition tax, even if the seller is based in Switzerland (domestic acquisition tax).
• Travel agency services (including resold travel services) will be exempt from VAT without the ability to claim input VAT credit. However, certain cases, such as business travel, may still have an option for taxation.
• The “place of supply” for streaming services in culture, arts, sports, education, science, and entertainment will be deemed to be at the recipient’s location.
• Various changes are expected in VAT regulations, including expanded exemptions in the healthcare sector, a VAT exemption for investment foundations, and the potential waiver of a fiscal representative for foreign taxpayers in the future.