TP Ticker – June 2018
New Zealand BEPS Legislation
In the New Zealand Parliament, the legislative process of the draft taxation bill on “Neutralising Base Erosion and Profit Shifting” continues after the second reading from 23 May with modifications and clarifications in the wording. The bill especially includes detailed new rules on dealing with related-party debt but also such on the recognition of permanent establishments and hybrid mismatches. It is intended to be effective from 1 July 2018 and therefore final steps in the legislation process can be expected to happen, soon.
The latest version of the draft bill and the progress of the legislation can be found on the website of the New Zealand parliament here: http://www.legislation.govt.nz/bill/government/2017/0003/latest/DLM7505806.html
and here: https://www.parliament.nz/en/pb/bills-and-laws/bills-proposed-laws/document/BILL_75623/taxation-neutralising-base-erosion-and-profit-shifting
Singapore Updates DTA Guidance
On 8 June 2018, the Income Revenue Authority of Singapore (“IRAS”) published the second edition of its e-Tax Guide on “Avoidance of Double Taxation Agreements (DTAs)”. The guide contains information on the interpretation and application of Singapore’s tax conventions and the mutual agreement procedure under these conventions.
The e-Tax Guide can be found on the website of the IRAS here: https://www.iras.gov.sg/irashome/uploadedFiles/IRASHome/e-Tax_Guides/etaxguide_Income%20Tax_Avoidance%20of%20Double%20Taxation%20Agreements%20(DTAs)_2nd.pdf
Indian Court Ruling on Marketing Expenses
On 14 May 2018, the Income-Tax Appellate Tribunal, Delhi Branch, had pronounced a ruling concerning the recharge of certain marketing expenses. In the case, the Indian affiliate of the group engaged in the import of products of the group and their resale in the local market. A foreign affiliate had arranged for the preparation of a marketing survey of the Indian market with a third-party provider on behalf of the Indian affiliate and had recharged the external cost for this survey to the affiliate.
The Indian tax authorities had denied the deduction for this amount based on the arguments (1) that the involvement of the foreign affiliate in the preparation of the report satisfies the assumption that it was carried out for the benefit of this foreign affiliate, and (2) that due to the importance of the Indian market, the foreign affiliate would have anyways undertaken this survey. The tribunal rejected the argumentation of the tax administration and emphasized that the survey could only benefit the Indian affiliate, as the foreign affiliate had no direct sales in the local market.
The wording of the pronouncement can be found online here: https://indiankanoon.org/doc/108623099/