TP Ticker – November 2018
OECD
On 13 September 2018, the OECD published an updated version of the “Guidance on the Implementation of Country-by-Country Reporting – BEPS Action 13”. This version of the guidance for the preparation of country-by-country (“CbC”) reports contains additional clarifications on the treatment of dividends, shortened amounts in the report, and major shareholdings.
The new guidance on dividends received acknowledges that while the Action 13 report clarified that dividends received from the constituent entities are nor to be included in revenue, there was no guidance on how to treat them with regard to profit/loss before income tax. As different tax administrations may have taken different approaches on how to treat with this topic, the OECD guidance now encourages taxpayers to indicate in table 3 of the CbC report whether they have included dividends in the profit/loss before income tax reported in table 1 and for which jurisdictions, in case this was handled different for the data of different countries. On shortened amounts, such as reporting the numbers in table 1 in units of thousands, the updated guidance clarifies that this should not be done. The numbers are to be reported in “full whole units”.
On the reporting of the number of employees for major shareholdings – constituent entities where minority shareholders outside the reporting group are participating – the guidance clarifies that in cases where the financial data of this entity is reported on a pro-rata basis, the employees of that entity should also be reported on a pro-rata-basis. This should then be clarified with a respective statement in table 3 of the CbC report. Additionally, to these new contents, a summarizing table on the clarifications about the treatment of mergers, acquisitions, and demergers was added.
The guidance can be found on the website of the OECD here: https://www.oecd.org/tax/beps/guidance-on-country-by-country-reporting-beps-action-13.htm
United States of America
On 13 September 2018, the Internal Revenue Service published new proposed guidance on the so-called global intangible low-taxed income (“GILTI”) under section 951A of the Internal Revenue Code. Section 951A was added to the US tax code by the Tax Cuts and Jobs Act of 2017 and foresees the inclusion of GILTI generated by controlled foreign corporations (“CFCs”) in the taxable income of US shareholders. In a simplified manner, GILTI is income that exceeds 10 percent of the operating assets of such CFCs with a limitation of the respective foreign tax credit to 80 percent. This regulation is independent of and largely parallel to transfer pricing aspects of intangibles, which are based on economic analyses instead on purely formal definitions as GILTI. The proposed regulations would further specify the administrative aspects of the treatment of GILTI for US taxpayers and comments are invited.
The proposed guidance can be accessed on the website of the Internal Revenue Service: https://www.irs.gov/pub/irs-drop/reg-104390-18.pdf
OECD
On 14 September 2018, the OECD published the comments received on its public discussion draft on the transfer pricing aspects of financial transactions under BEPS Action 8-10. The discussion draft had been published on 3 July and the public was invited to providing comments on the draft in general as well as on a number of specific questions contained in the draft. These comments are now published in the form of three PDF-files, covering together on over 950 pages the comments received from 78 parties.
The comments can be accessed on the website of the OECD here: https://www.oecd.org/tax/transfer-pricing/public-comments-received-on-beps-discussion-draft-on-the-transfer-pricing-aspects-of-financial-transactions.htm