Tax Talk
Global Developments

Direct Tax

OECD publishes Tax Morale Report aiming on trust between Tax Administrators and MNEs

Excerpts from oecd.org, 5 September 2022

As the international community prepares to implement a new global minimum tax, the results provide an important snapshot of current levels of trust and transparency—factors that will underpin the success of the new international tax rules.

The survey shows that while Multinational Enterprises (MNEs) are generally seen to demonstrate a formal commitment to cooperation with tax administrations, notably through on-time payment, perceptions of MNE transparency and trust in their information are less positive. There are strong regional differences, with tax administrations’ perceptions of MNE behavior generally poorer in Latin America, the Caribbean, and Africa to a lesser extent, compared with Asia and OECD countries.

The survey also reflects tax administrations’ perceptions of the behavior of the Big Four professional services networks (Deloitte, EY, KPMG, PricewaterhouseCoopers) on tax matters.

It shows similar patterns of positive perceptions of their willingness to follow the letter of the law and formal compliance but less positive perceptions of following the spirit of tax laws.

5 EU nations to jointly commit to Global Minimum Tax if no EU deal

Excerpts from Economic times, 10 September 2022

A group of European Union countries is considering new ways of implementing a global deal for a 15% minimum tax on large multinationals in 2023 as Hungary continues to veto a joint solution for the bloc.

Finance ministers from five of the largest EU economies said at a meeting in Prague on Friday they will strengthen their commitment to the plan by working on alternatives that would exclude Budapest.

"Should unanimity not be reached in the next weeks, our governments are fully determined to follow through on our commitment," Germany, France, Italy, Spain and the Netherlands said in a statement. We stand ready to implement the global minimum effective taxation in 2023 and by any possible legal means."

Bulgaria Deposits Ratification Instrument for BEPS MLI

Excerpts from oecd.org, 16 September 2022

Bulgaria has deposited its instrument of ratification for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS Convention), which now covers over 1820 bilateral tax treaties, thus underlining its strong commitment to preventing the abuse of tax treaties and base erosion and profit shifting (BEPS) by multinational enterprises. The BEPS Convention will enter into force on 1 January 2023 for Bulgaria.

On 1 October 2022, 910 treaties concluded among the 78 jurisdictions which have ratified, accepted or approved the BEPS Convention will have already been modified by the BEPS Convention. Around 910 additional treaties will be modified once all Signatories will have ratified the BEPS Convention.

Transfer Pricing

Middle East: Saudi Arabia’s Zakat, Tax and Customs Authority (ZATCA) modifies Transfer Pricing Bylaws following comments received on public consultation and The National Bureau for Revenue in Bahrain confirms the deadline for filing of Country by Country report for the financial year ended 31 December 2021

Saudi Arabia

Saudi Arabia’s ZATCA invited public inputs on the amendments proposed to the Transfer Pricing (TP) Bylaws which were initially introduced on 15 February 2019.

The proposed amendment broadens the applicability of TP Bylaws to cover the zakat³ payers under the ambit of annual TP compliance and documentation requirements, including Country-by-Country Reporting (CbCR) by substituting the word ‘taxpayers’ with ‘zakat payers and taxpayers.’ Initially, only income tax-paying entities and mixed entities (paying both zakat and income tax) were covered under the provisions of TP Bylaws.

ZATCA has agreed to some of the issues outlined in the public comments, which would take into consideration the following:

• Clarification of applicability of TP Bylaws to transactions between resident-related parties (100% Saudiowned entities).
• Guidance on the applicability of TP reporting requirements on consolidated zakat returns.
• Guidance on reporting of balance sheet items in the TP Disclosure Form.
• Applicability of TP Affidavit and TP Disclosure Form for zakat payers.
• Clarification on corresponding adjustments on related party transactions undertaken within Saudi Arabia.
• Clarification on advance pricing agreements, applicability date for compliance for zakat payers and guidance on how potential TP adjustments could be computed for zakat payers.

In view of the above developments, it would be imperative for the zakat payers to ensure they undertake timely TP compliance for their related party transactions.

Also, it is worthwhile to note that ZATCA did not agree to some of the issues in the public comments for the clarifications relating to the following matters:

• Mechanism for application of TP Bylaws on zakat payers whose zakat is calculated on deemed profit basis.
• Use of internal comparables for comparability analysis.

Bahrain

The National Bureau for Revenue confirmed that the deadline for preparing and filing CbCR for the ultimate parent company of a MNE resident in Bahrain would be 31 December 2022 for the financial year ending 31 December 2021.

Poland: Announcement of draft legislation for the changes to the Polish Corporate Income Tax (CIT) Law

Poland

Poland issues updated Polish CIT Law which is expected to be applied retrospectively for financial years commencing on 1 January 2021.

It has brought amendments in regulations regarding TP documentation for transactions with tax havens, including an increase of minimum thresholds triggering certain documentation obligations. Certain transactions with non-residents, which were subject to TP reporting, were exempted from some reporting obligations.