Owen, Christopher: Global Survey – September 2021

19 July 2021, BVI Governor John Rankin assented to the Criminal Justice (International Cooperation) (Amendment) Act 2021, the Counter-Terrorism Act 2021 and the Financial Investigation Agency (Amendment) Act 2021.

The Criminal Justice (International Cooperation) Act 1993 is amended to give statutory recognition to the Council of Competent Authorities, which includes the Governor’s Office, Attorney General, Financial Investigation Agency (FIA), International Tax Authority (ITA) and Financial Services Commission (FSC). The Attorney General will be the appropriate competent authority under the Act, with the Governor serving as the conduit for requests.

The new Counter Terrorism Act 2021 criminalises terrorism and the financing of terrorism, makes provision for the detection, prevention, prosecution, conviction of terrorist activities within the BVI and gives effect to several international conventions and resolutions for the countering of terrorism and terrorist financing.

The Act creates terrorist offences for, amongst others, the financing of terrorism, dealing with property derived or generated from a designated terrorist entity and making property or financial related services available to terrorist designated entities. If an offence by a body corporate is committed with the consent or the connivance of an officer of that body corporate or attributable to any act or default on their part, the officer as well as the body corporate is guilty of an offence and will be liable to be proceeded against and punished accordingly.

The Act places a duty on a person to report suspicious activities and transactions which may relate to property owned or controlled by designated terrorist entities. It provides for exchange and mutual legal assistance in criminal matters in relation to terrorist groups or acts and empowers the Commissioner of Police to make account monitoring orders for the purposes of a terrorist investigation.

The Financial Investigation Agency (Amendment) Act 2021 amends the Financial Investigation Agency Act 2003 to enhance the FIA's supervisory powers in relation to financial institutions (FIs), designated non-financial businesses and professions (DNFBPs) and non-profit organisations (NPOs) that are considered to pose money laundering, terrorist financing or proliferation financing risks.

It further empowers the FIA to better execute its mandate through the process of requesting relevant documents and information, examining persons under oath, issuing necessary directives, taking enforcement action as considered necessary and compounding an offence instead of taking the route of prosecution before the courts.

The new legislative framework in respect of anti-money laundering, combatting the financing of terrorist and countering proliferation financing (AML/CFT/CPF) is being brought in as part of the extensive preparations for the BVI’s on-site Fourth Round Mutual Evaluation assessment by the Caribbean Financial Action Task Force (CFTAF) in July 2022.

The BVI was deemed 'largely compliant' during the previous Third Round Mutual Evaluation in 2008 and was last reviewed in 2012. The Fourth Round Evaluation will cover expanded and updated criteria, and for the first time evaluate the effectiveness of the territory’s AML/CFT/CPF measures.

A first phase of legislation, passed on 14 June, included the Criminal Code (Amendment) Act 2021, the Customs Management and Duties (Amendment) Act 2021, the Drug Trafficking Offences (Amendment) Act, 2021, the Proceeds of Criminal Conduct (Amendment) Act 2021 and the Proliferation Financing (Prohibition) Act 2021.

The Criminal Code (Amendment) Act 2021 adds a new section to create predicate offences in relation to tax crimes, following FATF Recommendations designed to prevent tax evasion activities. The new offence of intending to defraud the BVI government will lead to liability on conviction to imprisonment for 10 years or a fine of US$500,000, or both.

The Customs Management and Duties (Amendment) Act 2021 provides for the accurate monitoring of goods coming into the BVI, detection of illegal goods and strengthening declaration provisions, including requiring the Commissioner of Customs to provide the FIA with information on declarations of cash over USD10,000, under-declarations of cash and non-declarations of cash.

The Drug Trafficking Offences (Amendment) Act 2021 establishes the FIA as the central body with responsibility for receiving suspicious transactions reports (SARs). An investigating officer or the FIA will be permitted to expand a drug trafficking investigation to establish whether a money laundering offence may also have been committed. The circumstances under which a police or customs officer may seize cash will be widened to include where reasonable grounds exist to suspect that the cash is intended to be used in relation to criminal conduct or that it represents the proceeds of criminal conduct.

The Proceeds of Criminal Conduct (Amendment) Act 2021 provides for enhanced procedures to detect money laundering and for ongoing monitoring on a risk-based approach. Related amendments will be made to the Anti-Money Laundering Regulations 2008 and the Anti-Money Laundering and Terrorist Financing Code of Practice 2008.

The new Proliferation Financing (Prohibition) Act, 2021 is designed to create provisions to prevent the proliferation of weapons of mass destruction and their financing by ensuring the implementation of targeted financial sanctions relating to counter-proliferation resolutions of the UN Security Council.

On 29 June, the Economic Substance (Companies and Limited Partnerships) (Amendment) Act 2021 was brought into force to extend the scope of the Act to limited partnerships without a legal personality that are formed on or after 1 July 2021 with immediate effect. A transitional period of six months applies to existing limited partnerships formed before 1 July.

To demonstrate economic substance, a company or limited partnership that falls within the scope of the Act by reason of being resident in the BVI and carrying out a relevant activity, must be ‘directed and managed’ in and carry out ‘core income generating activities’ within the BVI and must also meet defined standards of ‘adequacy’ and ‘appropriateness’.

26 July 2021, China’s State Taxation Administration (STA) issued Public Notice No. 24/2021 concerning the introduction of simplified procedures for applying for a unilateral advance pricing arrangement (APA), which is to be implemented from 1 September.

The procedure for applying for an APA in China generally involves six steps:

-Pre-filing meeting

-Letter of intent

-Analysis / evaluation

-Formal application

-Negotiation / signing

-Implementation / monitoring.

The new streamlined procedure will consolidate the letter of intent, analysis / evaluation and formal application steps into one, and eliminate the pre-filing meeting step altogether. This will have the effect of condensing the whole process into three steps.

The latest China APA Annual Report, released in October 2020, shows that China signed 101 unilateral APAs from 2005 to 2019, accounting for 57% of all APAs signed. On average, 52% of new unilateral APAs were entered into within one year and 89% within two years.

However, the 2019 statistics showed that this process had slowed down. Of the 12 unilateral APAs, including one renewal, signed in 2019, only 17% were signed within one year and only 50% within two. This was due to limited resources and a significant increase in applications.

Under the new streamlined application procedure, the processing schedule for a unilateral APA will be nine months. The tax authorities will conduct an analysis within 90 days of receiving an application and, if accepted, will negotiate and sign the APA within six months.

To qualify for the simplified procedure, an applicant must have related-party transactions of more than RMB40 million (approximately USD6.2 million) for the three years before the tax year in which the tax authorities accept the case. Applicants that have failed to maintain transfer pricing documentation or have been subject to a transfer pricing or tax-related investigation will also not be accepted.

4 August 2021, the England and Wales Court of Appeal (EWCA) restored the First-tier Tax Tribunal (FTT) decisions that the film partnerships in the long-running Ingenious Media Group partnership litigation were trading – and doing so with a view to a profit – overturning the Upper Tribunal’s (UT) findings on these points.

In Ingenious Games LLP & Ors v HMRC [2021] EWCA Civ 1180, the Ingenious Media Group had marketed tax avoidance schemes, involving limited liability partnerships (LLPs) that invested in films or video games, to individual UK taxpayers in the tax years 2002/03 to 2009/10 inclusive.

The schemes were designed as a means of enabling higher-rate UK taxpayers to shelter income which would otherwise have been subject to the higher rate of income tax by claiming ‘sideways’ loss relief available to them as individual members of the LLPs. In the earlier years under appeal, this relief was provided by section 380 of the Income & Corporation Taxes Act 1988. In the later years, it was provided in materially similar terms by section 64 of the Income Tax Act 2007.

For the taxpayers to obtain initial sideways relief from income tax in an amount sufficient to recoup their initial contribution to the LLP, it was necessary for their investment to be geared such that the sums contributed by the LLP would be substantially greater than the sums put in by the individual members; the anticipated losses were nevertheless allocated in their entirety to the individual members.

Typically, for every 30% contributed by the individual members to the LLP, a further 70% would be contributed by a corporate member of the LLP. Scheme users borrowed large sums from various banks to invest in the partnerships. However, HMRC subsequently disallowed their claims for sideways loss relief, causing the investors heavy losses.

The LLPs challenged HMRC's position, starting in the FTT in August 2016. It determined that the investment partnerships Inside Track Productions and Ingenious Film Partners 2 were carrying on a trade for profit and were thus entitled to claim loss relief against general income.

However, as HMRC successfully argued, the LLP investors were only entitled to losses commensurate with the amount they had contributed so that they would only be entitled to 30% rather than 100% of the losses. Furthermore, the rights in respect of the films acquired by the LLPs were capital in nature. As a result, around 96% of the claimed losses were disallowed.

The LLPs then went to the Upper Tribunal in 2019. The UT agreed with HMRC that the activities carried on by the LLPs did not constitute a trade genuinely carried on with a view to profit and that therefore none of the investors' expenditure on film rights could be written off against taxable profits

Permission was given to appeal to the Court of Appeal on the questions of whether the LLPs were trading for income tax purposes and, if so, whether this was ‘with a view to profit’, which was required for the losses to be available to the investors.

The Court of Appeal disagreed with the UT’s view that the FTT’s decision on the ‘view to a profit’ point had been incorrect because the taxpayers had only argued that they were trading with a view to a profit on the basis that they were entitled to 100% of the losses as this was only basis on which the projected tax benefits for the individual investors could be achieved. They had not specifically argued the point on the basis that they were entitled to 30% of the profits.

The Court said that whilst obtaining 100% of the losses provided the motivation for the participation of the LLPs in the transactions, view to a profit was a “much narrower question … which is simply whether the controlling minds had a subjective view to profit in causing the LLPs to enter into the relevant transactions”.

The court said that “the answer to this straightforward question of fact should not be infected by the underlying fiscal motivation which drove the whole exercise”. The fact that the FTT found that the LLPs had failed to establish the necessary subjective intention on the 100% basis did not preclude the FTT from finding that the subjective test was satisfied on a correct legal analysis of the composite transactions entered into by the LLPs.

On the question of whether the LLP was trading, the Court of Appeal reiterated that the UT could only interfere with the FTT decision if there had been an error of law. It was immaterial whether the UT would itself have come to the same conclusion on the totality of the evidence.

Overturning the UT’s July 2019 ruling, the Court of Appeal said that none of the alleged errors of law identified by the UT had any substance. It had not been suggested that the FTT had misunderstood or misdirected itself in relation to the underlying legal principles, so there was no basis upon which the UT could properly interfere with the conclusion of the FTT on the trading issue.

The Court of Appeal was also not prepared to overturn the FTT’s finding of fact that the partnership that had invested in video games (Ingenious Games) was not trading. The appeal could only succeed on the basis that the findings of fact made by the FTT were erroneous in point of law. The court described this as a “hopeless endeavour” and said it was in no position to review the mass of evidence that the FTT had to consider.

The full decision can be accessed at http://www.bailii.org/ew/cases/EWCA/Civ/2021/1180.html

23 July 2021, the Netherlands Arbitration Institute, part of the International Court of Arbitration, determined that the transfer in 2006 of an indirect stake in Portuguese oil company Galp Energia valued at USD500 million, from Angolan state-owned energy group Sonangol to a company controlled by the daughter of the former Angolan president Jose Eduardo dos Santos, was “contaminated by illegality” and should be considered “null and void”.

Isabel Dos Santos has been fighting a legal battle against Angola’s government since President Joao Lourenco replaced her father as President of Africa’s second-biggest oil producer in 2017. Angolan prosecutors accuse the Dos Santos family of extracting more than USD5 billion from the country’s economy. Before stepping down, her father appointed her as chair of Sonangol. She was dismissed in 2018.

The Galp stake was acquired in 2006 through Exem Energy, a company owned by Dos Santos' late husband. Having paid a 15% deposit from the bank account of a BVI company, Dos Santos allegedly tried to settle the balance in kwanzas, Angola's local currency, while she was chair of Sonangol in 2017, rather than in euros as agreed in the sale contract. Her successor at Sonangol returned the payment.

As a result of the court’s decision, Sonangol said it will take back control of Dos Santos’ 40% stake in Esperaza Holding, the vehicle used by the energy company to buy shares in Galp and become the sole shareholder. Esperaza owns 45% of Amorim Energia, a holding company that has a 33.34% stake in Galp.

Exem said it disagreed with the court’s ruling and would appeal the decision. “In this arbitration decision, the political narrative clearly overlaps the legal analysis,” Exem said in a statement. “For this reason, since it is not possible to agree, in legal and factual terms, with the arbitration decision, a judicial appeal will be filed with the competent court.”

Details of Dos Santos’ acquisition of a stake in Galp were first reported by the International Consortium of Investigative Journalists as part of the release of 715,000 files in January 2020, the so-called ‘Luanda Leaks’. It described how Sonangol financed almost the entire purchase of her indirect holding.

In addition to the Galp holding, she was found to have major bank stakes and a controlling share in a Portuguese cable TV and telecom firm. In December 2019, Angola's prosecutors froze bank accounts and assets owned by her and her husband Sindika Dokolo, who died last year.

20 August 2021, the Financial Action Task Force (FATF) concluded a public consultation on proposed amendments to Recommendation 24 on the transparency and beneficial ownership (BO) of legal persons.

The objective is to strengthen the international standard on beneficial ownership of legal persons to ensure greater transparency about the ultimate ownership and control of legal persons, providing competent authorities timely access to adequate, accurate and up-to-date beneficial ownership information, and to take more effective action to mitigate the risks of misuse.

Given the use of cross-border ownership structures to conceal beneficial ownership, the FATF is considering whether all countries should apply measures to understand the risk posed by all types of legal person created in the country (as currently required) and to certain foreign-created legal persons, and to take appropriate steps to manage and mitigate these risks.

To manage the task regarding foreign-created legal persons that countries should understand and mitigate the risk, FATF is considering limiting the scope to foreign-registered legal persons that have sufficient links with the countries.

The FATF recommends that countries use a multi-pronged approach to ensure that BO information is available to competent authorities. It is evaluating countries’ experience to date of the creation and operation of beneficial ownership registries and is considering what core elements should be included in a multi-pronged approach, and what supplementary measures should be considered for inclusion.

This includes the benefits to law enforcement and other competent authorities of registries and other approaches, the costs and compliance burden associated with beneficial ownership registries to governments and companies; the value of information; the risks around the introduction of registries and other approaches, and other requirements and challenges for each of these approaches to be successful.

The FATF is considering how to clarify the key attributes of access to information by competent authorities, that access should be timely, and information should be adequate (to identify the beneficial owner’s identity and means of ownership), accurate (i.e. verified using documents or other methods, on a risk-sensitive basis) and up to date (i.e. updated within a certain period following any changes).

The FATF is considering who should have access to beneficial ownership information, whether held by a registry or another mechanism, and how confidentiality or privacy should be protected.

The FATF is considering possible measures to strengthen controls on bearer shares and nominees to prevent them from being used to conceal the beneficial owners of legal persons. This includes potential prohibition on the issuance of new physical bearer shares and a requirement for existing physical bearer shares to be immobilised or converted before any associated rights can be exercised.

The FATF is also considering requiring nominee directors and shareholders to proactively declare their status and (for non-regulated nominees) their nominator to the company and to a registry or financial institution.

At this stage, the FATF has not approved any draft amendments to R.24. The FATF will consider the views received and propose revisions to the text of R.24 for discussions at its October 2021 meetings.

10 August 2021, the German Ministry of Finance and US Internal Revenue Service published a joint statement on implementation of the spontaneous exchange of country-by-country (CbC) reports for fiscal years beginning in 2020. Similar joint statements were previously issued for the 2016, 2017, 2018, and 2019 tax years.

The joint statement provides that CbC Reports for fiscal years of multinational enterprise (MNE) groups commencing on or after 1 January 2020 and before 1 January 2021 will be spontaneously exchanged under Article 26 (Exchange of Information and Administrative Assistance) of the 1989 Germany-US income and capital tax treaty, as amended.

The US and German governments are negotiating an intergovernmental agreement and a competent authority arrangement to allow for the automatic exchange of CbC Reports. However, the competent authorities desire to exchange CbC reports for the fiscal years of MNE groups commencing on or after 1 January 2020 and before 1 January 2021, without waiting for the negotiation’s conclusion.

“Indeed, the competent authorities acknowledge that assessing high-level transfer pricing risks and other base erosion and profit shifting risks, as well as economic and statistical analysis, where appropriate, are critical objectives of exchanging CbC Reports that should not be postponed,” said the joint statement. “The CbC Reports for fiscal years of MNE groups commencing on or after 1 January 2020 and before 1 January 2021 are relevant to these objectives.”

24 August 2021, the Isle of Man Financial Services Authority has announced the appointment of Bettina Roth as its next Chief Executive Officer, taking over from Karen Badgerow who retired in July after six years in the role. She will also join the IOMFSA Board

Roth is currently Deputy Head of Banking Supervision Division at the Cayman Islands Monetary Authority and will relocate to the Isle of Man in the autumn. She was previously the Director of Banking and Insurance Supervision at the Abu Dhabi Global Market (ADGM).

A chartered accountant, Roth spent 17 years at the Office of the Superintendent of Financial Institutions (OSFI) Canada, latterly serving as managing director. She also completed a secondment with the Office of the Comptroller of the Currency (OCC) in New York as part of the Citibank supervision team.

3 August 2021, Jamaica committed to implement the Common Reporting Standard (CRS) for Automatic Exchange of Financial Account Information in Tax Matters (AEOI) by 2022. In doing so it became the 117th member of the 163-member Global Forum on Transparency and Exchange of Information for Tax Purposes to commit to start AEOI by a specific date.

Global Forum chair Maria José Garde said “As for the 116 other committed jurisdictions, the Global Forum will monitor Jamaica’s progress in delivering its commitment to start exchanging automatically by September 2022 and updates will be provided to our members and the G20. The Global Forum Secretariat will assist Jamaica in implementing the Standard and in addressing any challenges that may arise”.

The Global Forum is the leading multilateral body mandated to ensure that jurisdictions around the world adhere to and effectively implement both the standard of transparency and exchange of information on request and the standard of automatic exchange of financial account information. These objectives are achieved through a monitoring and peer review process.

20 August 2021, the Jersey Financial Services Commission (JFSC) issued an update to its beneficial ownership guidance. The guidance was previously updated in January when the Financial Services (Disclosure and Provision of Information) (Jersey) Law 2020 (Disclosure Law), which established a new central register of beneficial owners and significant persons in Jersey, was brought into force.

The register, which enacted the Financial Action Task Force's (FATF’s) Recommendation 24 relating to the beneficial ownership of legal persons, became operational in late February. Entities within scope were required to update the register by 30 April, but this was deferred to 30 September.

Entities in scope include companies, foundations, incorporated limited partnerships, separate limited partnerships, limited liability companies and limited liability partnerships. Any changes to the beneficial ownership information of these entities must be reported within 21 days.

The JFSC has made two key updates to the guidance. In Section 1, the guidance now explains the definition of ‘beneficial owner under the law and how the JFSC records the information in myRegistry.

The other key update is in Section 5 for companies owned by a trust. It is no longer a requirement to record the settlor as a controller unless the settlor has retained powers of control; for example, the right to appoint or remove a trustee, to amend the trust deed or to revoke the trust.

Settlors, instigators and arrangers will not be recorded as controllers, but the JFSC will still collect their details as part of the wider information it uses to assess the activities and structure.

Beneficial owners of entities will not be made public until an EU consensus has been reached on relevant disclosure standards and nominated person information will not be made publicly available.

26 July 2021, the Federal Government of Nigeria opened new London Declaration Facilities in respect of its Voluntary Offshore Assets Regularisation Scheme (VOARS) to add to similar facilities in Abuja and Dubai.

VOARS is an opportunity for Nigerian relevant persons and their intermediaries to voluntarily regularise their offshore assets held anywhere in the world by paying a one-off levy as fine for the years of irregularity. Declarants enjoy a permanent waiver of prosecution for offences related to the assets voluntarily declared.

The Scheme was established under Presidential Executive Order 008 for Voluntary Offshore Assets Regularisation Scheme (VOARS) 2018 Amendment 2019. All proceeds are transparently invested in infrastructure development in Nigeria through the Nigeria Essential Infrastructure Fund (NEIF).

5 August 2021, the OECD Forum on Harmful Tax Practices (FHTP) released its latest peer-review results on preferential tax regimes that had previously been identified as ‘potentially harmful’ under the OECD's Base Erosion and Profit Shifting (BEPS) initiative.

The results were based on conclusions presented to the FHTP’s April 2021 meeting as part of the implementation of the Action 5 minimum standard, which involves two distinct aspects: a review of certain preferential tax regimes and substantial activities in no or only nominal tax jurisdictions to ensure they are not harmful, and the transparency framework.

One of the four BEPS minimum standards, all members of the Inclusive Framework on BEPS have committed to implementing the Action 5 minimum standard and to participating in the peer review, on an equal footing. The peer review of the Action 5 minimum standard is undertaken by the FHTP and approved by the Inclusive Framework on BEPS.

Based on an earlier government commitment, Australia’s ‘offshore banking unit’ regime has, subject to final adoption of legislative amendments, been abolished, with grandfathering provided to existing taxpayers within the FHTP’s timelines.

The Philippines is also to abolish its Regional operating headquarters regime as of 1 January 2022 (without grandfathering), which was found to be "potentially harmful but not actually harmful" for the time being. Ring-fencing and substantial activities factors were implicated, but there were no harmful economic effects in practice.

The US has also confirmed its intention to abolish the Foreign derived intangible income (FDII) regime, which the FHTP said was "in the process of being eliminated".

Government commitments were also made for six other regimes that are now "in the process of being amended/eliminated" – Dominican Republic (‘border development’ and ‘logistics centres’), Gabon (‘special economic zones’), Sint Maarten (‘tax exempt company’) and Jordan (‘Aqaba special economic zone’).

Two newly introduced regimes were also found to be ‘not harmful’. Hong Kong’s profits tax concession for specified insurers and licensed insurance broker companies was “designed in compliance with FHTP standards”, as was Georgia’s ‘International company’ regime.

However, Trinidad & Tobago had not been able to fulfil its commitment to abolish its ‘special economic zone’ regime within the agreed timelines. It was now therefore considered to be ‘harmful’.

Finally, the FHTP reviewed 12 regimes for the first time, and these are now ‘under review’ – Armenia (‘free economic zones’), Eswatini (‘special economic zones’), Honduras (‘free zones (ZOLI)’ and ‘employment and economic development zones (ZEDE)’), Lithuania (‘large scale investment projects’) and Pakistan (‘export regime on IT’).

Since the start of the BEPS Project, the FHTP has reviewed 309 regimes. In most cases, it said, any ‘harmful’ tax practices have either been abolished or the governments concerned have committed to abolish or modify them. The Peer Review results can be accessed at https://www.oecd.org/tax/beps/harmful-tax-practices-peer-review-results-on-preferential-regimes.pdf

3 August 2021, the OECD published updated transfer pricing country profiles, reflecting the current transfer pricing legislation and practices of 20 jurisdictions. These updated profiles also contain new information on countries' legislation and practices regarding the transfer pricing treatment of financial transactions and the application of the Authorised OECD Approach (AOA) to attribute profits to permanent establishments (PEs).

The transfer pricing country profiles focus on countries' domestic legislation regarding key transfer pricing aspects, including the arm's length principle, methods, comparability analysis, intangible property, intra-group services, cost contribution agreements, documentation, administrative approaches to avoiding and resolving disputes, safe harbours and other implementation measures.

The newly updated country profiles also include two new fields: the first relating to the transfer pricing treatment of financial transactions; the second on the application of the AOA to PEs. The information contained in the country profiles is intended to clearly reflect the current state of countries' legislation and to indicate the extent to which their rules follow the OECD Transfer Pricing Guidelines and the AOA to PEs.

The OECD has published transfer pricing country profiles since 2009 for OECD members and associate jurisdictions. These were significantly modified in 2017 to reflect the changes in the transfer pricing framework of jurisdictions following the 2015 OECD/G20 Base Erosion and Profit Shifting (BEPS) Project reports on Actions 8-10 and on Action 13. The country profiles were also expanded to cover non-OECD member jurisdictions.

The profiles for 20 jurisdictions have been updated, including three new country profiles from Inclusive Framework members – Angola, Romania and Tunisia – bringing the total number of countries covered to 60. Updates to the transfer pricing country profiles will be conducted in batches throughout the second half of 2021 and the first half of 2022.

The latest transfer pricing country profiles can be accessed at https://oe.cd/transfer-pricing-country-profiles

23 August 2021, Russia’s Department of Economic Cooperation said, in an interview with Sputnik, that there was a proposal with Switzerland does not rule out inviting Hong Kong and Singapore to adjust their respective double tax agreements (DTAs) with Russia to allow for higher withholding taxes to be levied to generate more tax revenue for Russia.

In March 2020, President Vladimir Putin announced his intention to revise several Russia’s DTAs to increase the dividend withholding rate to 15%, while retaining a reduced 5% withholding tax for public companies, and an increase in the interest rate from zero to 15%. He warned that Russia would unilaterally withdraw from treaties with countries that fail to accept these terms.

Since then, Russia has negotiated and signed new protocols to amend its DTAs with Cyprus, Malta and Luxembourg on 8 September, 1 October and 6 November 2020 respectively. However, it failed to reach agreement with the Dutch government and, in June this year, gave a notice of termination in respect of its existing DTA with the Netherlands – the final step in the process of denouncing the treaty.

"We are negotiating with a number of nations,” said Dmitry Birichevsky, Director of the Department of Economic Cooperation in the Russian Foreign Ministry. “As far as we know, there is a proposal to revise the bilateral agreement with Switzerland. The finance ministry does not rule out inviting Hong Kong and Singapore to revise relevant bilateral agreements. According to expert estimates, this could cover around 90% of the so-called transit jurisdictions."

10 August 2021, the Inland Revenue Authority of Singapore (IRAS) updated its transfer pricing (TP) guidelines with the release of the IRAS e-Tax Guide: Transfer Pricing Guidelines (Sixth Edition), which adds a new chapter on cost contribution arrangements, expands guidance on financial transactions and makes other various other revisions.

The changes are generally consistent with the OECD’s 2017 Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations published. IRAS has provided additional guidance and clarification in respect of TP documentation (TPD) compliance, surcharges on TP adjustments, advanced pricing arrangements (APA) and mutual agreement procedure (MAP) requests.

The new Chapter 17 sets out the rules dealing with cost contribution arrangements (CCAs) for businesses entering into contractual arrangements to share contributions and risks associated with the development of intangible or tangible assets or the obtaining of services.

It explains how to apply the arm’s length principle to CCAs, including determining participants and allocations of expected benefits and contributions, and clarifies the arm’s length requirement for entry and withdrawal of participants and termination of the CCAs.

The expanded chapter on related party financial transactions includes guidance on applying the arm’s length principle to related party financial transactions other than loans, including cash pooling, hedging, financial guarantees and captive insurance.

IRAS raises the availability of arbitration under certain Double Taxation Agreements (DTAs) to resolve TP disputes that cannot be settled under a MAP within a certain period, subject to certain conditions being met.

Where TP adjustments are made by foreign tax authorities, IRAS will not allow an additional tax deduction claim and will not allow the refund of taxes previously withheld in the absence of a MAP application.

11 August 2021, the Maldives, Papua New Guinea and Rwanda signed the multilateral Convention on Mutual Administrative Assistance in Tax Matters, bringing the total number of participating jurisdictions to 144.

The Convention is the primary instrument for swift implementation of the Common Reporting Standard (CRS) for Automatic Exchange of Financial Account Information in Tax Matters. The CRS – developed by the OECD and G20 countries – enables more than 100 jurisdictions to automatically exchange offshore financial account information.

The Convention enables jurisdictions to engage in a wide range of mutual assistance in tax matters: exchange of information on request, spontaneous exchange, automatic exchange, tax examinations abroad, simultaneous tax examinations and assistance in tax collection. It is also a key instrument for the implementation of the transparency standards of the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project.

In addition to over 8,000 exchange relationships currently in place, the signings by the Maldives, Papua New Guinea and Rwanda will trigger 429 new exchange relationships following ratification, allowing them to engage in the exchange of information with 143 other jurisdictions, including all major financial centres.

In addition to the signings, Jordan deposited its instrument of ratification of the Convention, ensuring that the Convention will come into force for Jordan as from 2022. Singapore further deposited a notification subsequent to ratification for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI).

23 August 2021, the US Department of the Treasury and the Monetary Authority of Singapore (MAS) announced the finalisation of a bilateral Memorandum of Understanding on Cybersecurity Cooperation.

The MoU formalises and strengthens cybersecurity partnership between both agencies and enhances cooperation in the following areas:

-Information sharing relating to the financial sector, including cybersecurity regulations and guidance, cybersecurity incidents, and cybersecurity threat intelligence

-Staff training and study visits to promote cooperation around cybersecurity

-Competency-building activities such as the conduct of cross-border cybersecurity exercises.

MAS Managing Director Ravi Menon said: “Given the growing complexity of cyber-attacks and how interconnected the global financial system is, close cooperation is essential to ensure the cyber resilience of our financial systems. This MoU between the Treasury and MAS will be particularly useful in the areas of cyber threat information sharing and cross-border cybersecurity exercises. It will also help cement what is already a strong and fruitful partnership between the two institutions.”