Transfer Pricing
Australia introduces public country-by- country reporting - legislation6
Since the introduction of Action 13 of the original Base Erosion and Profit Shifting (BEPS) project, the world’s largest multinationals have been required to provide Countryby- Country (CbC) tax information to tax administrations in numerous jurisdictions around the world. It is intended to provide tax authorities with more information about the geographic footprints of global businesses. Importantly, the data, much of which may be commercially sensitive, is subject to tax authorities’ obligations to protect the confidentiality of taxpayer information.
However, with the intent of increasing tax transparency for multinational enterprises, on 5 June 2024, legislation pertaining to public disclosures of CbC tax information was introduced in the Australian Parliament.
Effective period
The legislation would be effective for reporting periods on or after 1 July 2024. For December year-end groups, the 31 December 2025 year will be the first year for which public CbC Reporting (CbCR) is required in Australia.
Applicability
The rules would apply to groups with a presence in Australia (an Australian resident entity or an Australian permanent establishment), global consolidated income of more than AUD 1 billion in the prior year, and AUD 10 million or more of aggregated Australian-sourced income in the current year. The legislation also allows the Commissioner to exempt certain classes of entities and to provide exemptions for specific entities. It is pertinent to note that the legislation seems to indicate that certain types of government entities might be exempted, it is expected that other exemptions would be limited.
Reporting requirements
Enhancing the disclosure requirements, in-scope groups will generally be required to report the belowmentioned information to the Australian Commissioner of Taxation (Commissioner) within 12 months of the end of the reporting period, which would eventually be published on an Australian government website.
- names of each entity within the CbCR group;
- description of the CbCR group’s tax approach; and
- quantitative tax information for the income year for the relevant jurisdictions wherein the CbC group operates.
Several other pieces of financial and other information will be required to be disclosed publicly for each entity listed, which would include details relating to the number of employees, revenue from overseas related parties and unrelated parties, profit/loss before tax for the relevant period, income tax paid and accrued, etc.
The CbCR parent may, at its discretion, either publish disaggregated data for specific jurisdictions and aggregated data for balance jurisdictions (as a minimum compliance standard) or publish disaggregated data for each jurisdiction of the group.
Failure by the CbCR parent to publish information on time or publish information to the correct ‘material’ error on time may attract an administrative penalty.
The reporting requirements are specifically laid down for CbCR parents. It would be worthwhile to see how the Australian Taxation Office (ATO) would administer the penalties for late filing and/or non-compliance with CbCR when the reporting parent is an entity domiciled outside of Australia. Currently, there is no guidance on this in the recently introduced legislation.
However, there is a strong likelihood that such non-compliance penalties would be applied to the local Australian entity when the CbCR parent is not domiciled in Australia.
Public CbCR requirements mark a giant leap toward fostering transparency and ethical tax practices. It would be pivotal for multinational groups to proactively involve key stakeholders locally and internationally for the collation of such robust information prior to public disclosure.
Indirect Tax
Columbia increases e-invoicing audits and inspections for non-compliance
Excerpts from various sources
In 2024, the Colombian Tax Authority (DIAN) intensified audits and inspections focused on e-invoicing compliance. Failure to adhere to technical requirements for issuing or delivering e-invoices can lead to penalizing the taxpayers with the closure of business premises for a period of three days.
Alternatively, instead of closure, taxpayers can opt to pay a fine equivalent to 5% of their operational income of the previous month. DIAN plans to further increase such audits and inspections throughout the year.
Poland delays E-invoicing mandate
Excerpts from various sources
Initially planned for July 2024, the Polish e-invoicing system (KSeF) has been postponed due to problems in the system’s code, functionality and efficiency. The new implementation schedule for E-invoicing has been released as below:
- Mandatory from 1 February 2026 for entrepreneurs whose sales value (including the tax amount) exceeded PLN 200 million in 2025.
- For the rest of the entrepreneurs, it will be mandatory from 1 April 2026.
Romania expands E-invoicing mandate to include B2C transactions
Excerpts from various sources
The Romanian Ministry of Finance issued Urgent Ordinance 69/2024 on 21 June 2024 to include an e-invoicing mandate for business-to-consumer (B2C) transactions.
From January 2025, businesses must mandatorily use the RO e-invoicing system for B2C transactions. However, voluntary adoption began on 1 July 2024. The Ordinance further emphasizes the timely submission of invoices to the RO e-invoicing system within five days of issuance.
Exceptions apply to certain entities with implementation deadlines extended to 1 July 2025.
AG Capeta clarifies VAT treatment of EV charging through cards/apps
Excerpts from various sources
In April 2024, the Advocate General (AG) Capeta of the Court of Justice of the European Union (CJEU) issued her opinion in a case involving the VAT treatment of the supply of electricity between Charging Point Operator (CPO), the e-Mobility Service Provider (e-MSP) and the electric vehicle (EV) driver.
The AG’s opinion suggests that the provision of a card and an authentication app, which allow users to charge their EVs, should be considered a supply of goods under the commissionaire model. According to her, the provision of a card or app can be interpreted as an implicit instruction to e-MSP to purchase a specific quantity of electricity, and the supply of electricity in the transaction between the CPO and e-MSP is not different from that in the transaction between e-MSP and the EV driver. Accordingly, both supplies are subject to VAT.
It may be pertinent to note that CJEU had already ruled in 2023 that the charging of a vehicle must be considered a supply of goods consisting of the supply of electricity.