Owen, Christopher: Global Survey – July 2020

  • BVI’s new Economic Substance Portal goes live
    • 12 June 2020, the BVI International Tax Authority (ITA) informed all registered agents (RAs) and legal entities with reporting obligations under the Economic Substance (Companies and Limited Partnerships) Act 2018 and the Beneficial Ownership Secure Search System Act 2017 that the Economic Substance Portal, as integrated with the Beneficial Ownership Secure Search (BOSS(ES)s), had gone live.

      The deadline for legal entities to file declarations is six months after the end of their financial period. The prescribed financial period for those legal entities incorporated before 1 January 2019 is 30 June 2019 to 29 June 2020.

      The prescribed financial period for legal entities that were incorporated on or after 1 January 2019 will begin on the date of incorporation of the company and end one year after that date. All notifications to alter the financial period of the company must continue to be made to the ITA via info@bviita.vg in accordance with the rules.

      Only RAs have access to the BOSS(ES)s portal and all declarations made on behalf of a legal entity must be done by the RAs.

      The ITA also informed entities about recent updates to its BVIFARS system, a web-based portal to provide a secure environment for BVI Financial Institutions to satisfy their obligations under the US Foreign Account Tax Compliance Act (FATCA), the UK Crown Dependencies and Overseas Territories International Tax Compliance Regulations (UK CDOT) and the OECD Common Reporting Standards (CRS).

      Users can also now update necessary information such as changing the details of the primary user or deregistering an entity via BVIFARS. Entities that are required to make Country-by-Country reports under Action 13 of the OECD/G20 Base Erosion and Profit Shifting Project can now register on the Portal. This applies to entities that are the Ultimate Parent Entity (UPE) or the Surrogate Parent Entity (SPE) and are resident in the BVI for tax purposes.


  • Cayman brings Single Family Offices under Securities Investment Business Law
    • 30 June 2020, the Cayman Islands Ministry of Financial Services & Home Affairs issued an industry update to advise that, following consultation, single family offices (SFOs) conducting securities investment business will now be brought within the scope of regulation pursuant to the Securities Investment Business Law (SIBL).

      The SIBL was amended in June 2019 to deal with entities that were allowed to be excluded from the SIBL licensing requirements (excluded persons). Following the amendments, excluded persons have been known as registered persons and are captured under Schedule 4 of SIBL. Registered persons are required to be registered with the Cayman Islands Monetary Authority (CIMA) and subject to prudential regulatory oversight.

      SFOs fell within Schedule 2A of SIBL as ‘non-registerable persons’, meaning they were carved out of this prudential oversight by CIMA. However the SFO Regulations were drafted under the Proceeds of Crime Law in order to assign CIMA as the AML supervisor and also to ensure data regarding the numbers of SFOs operating in or from within the Islands is captured.

      After further consideration of the supervisory requirements outlined by the Financial Action Task Force (FATF), the Ministry of Financial Services concluded that it was necessary to include a test that CIMA could undertake to assess fitness and propriety of the SFO and of its members. It was also necessary for CIMA to have the power of inspection in order to achieve effective supervision.

      In order to meet the requirements of regulations and to avoid duplicating the provisions within SIBL, the ministry has therefore decided that the current exemption within schedule 2A SIBL for SFOs should be removed and they will be required to be regulated under SIBL if they are conducting securities investment business under the definition at section 4 of SIBL.

      As of 29 June, companies that are registered as Registered Persons under the SIBL will no longer be required to comply with the beneficial ownership obligations under the Companies Law or the Limited Liability Companies Law, as applicable.

      Although a Registered Person’s obligation to comply with beneficial ownership ceases, they have the following ongoing obligations under the Law that were not previously imposed on excluded persons:

      -To have at least two directors, managers, partners (as applicable), or one corporate director, that are fit and proper persons;

      -To notify CIMA within 21 days of any material change to the information filed with CIMA, including any changes to its senior officers and any change to the ownership, direct and indirect, of the Registered Person;

      -To maintain segregation of client funds from its funds and separately account for both.

      CIMA now has substantial enforcement powers to ensure effective regulatory oversight of Registered Persons and their compliance. These powers and oversight were not previously applicable to excluded persons.

  • Cayman Islands introduces penalties for beneficial ownership disclosure failures
    • 29 June 2020, amendments to the Companies Law (2020 Revision) and the Limited Liability Companies Law (2020 Revision) were brought into force giving the Cayman Islands Registrar of Companies authority to impose fines for breaches of the beneficial ownership reporting regime.

      Beneficial owners and other entities in the ownership and control structures of entities that are within the regime's scope must provide prescribed information to the relevant in-scope entities or be liable to fines and other penalties.

      The penalties start at USD6,100 for the initial breach with continuing breaches attracting further monthly fines of USD1,220, up to a maximum of USD30,500 for a single breach. Companies that fail to pay within 90 days may be struck off the register and dissolved.

  • EU Council agrees to extend DAC6 reporting deadlines
    • 24 June 2020, the Council of the European Union adopted an amending directive giving EU member states the option to delay the date of 1 July 2020 for filing and exchanging information in respect of the mandatory disclosure requirements for intermediaries and other taxpayers under the Directive on Administrative Cooperation (DAC6) by up to six months, because of the disruption caused by the coronavirus pandemic. A further three months' delay, if necessary, may be agreed later.

      DAC 6 requires intermediaries – or, under certain circumstances, relevant taxpayers – to provide information on reportable cross-border arrangements that gave rise to a tax advantage to the appropriate tax authorities within a certain time schedule. The tax authorities must then exchange information with other member states through an EU portal. Arrangements that must be reported are those that meet one or more of the hallmarks listed in the annex to the directive.

      Under the current provisions of DAC6, as from 1 July 2020, arrangements that fall within the scope of the directive have to be reported within 30 days after the arrangement is made available for implementation, or is ready for implementation, or the first step in the implementation has taken place.

      For so-called 'backfill' arrangements, where the first step in the implementation took place between 25 June 2018 and 30 June 2020, reports must now be made by 28 February 2021, instead of by 31 August 2020 as originally required.

      Arrangements made available or ready for implementation, or where the first step in the implementation took place between 1 July and 31 December 2020, must be reported by 30 January 2021. Arrangements in respect of which an intermediary provided aid, assistance or advice between 1 July 2020 and 31 December 2020 must now be reported by 30 January 2021. Arrangements that become reportable on or after 1 January 2021 must be reported as normal.

      The Council also agreed to a six-month delay for automatic exchange of information on the financial accounts of beneficiaries who are tax resident in another member state. This change will allow member states to extend reporting financial institutions’ deadlines for filing the information with the state.

      Depending on the course of the pandemic, the amended directive also provides that the deadline deferral could be extended for a further three months by a unanimous council vote on a commission proposal, which should be held one month before the relevant reporting deadlines expire.

      Many EU Member States have announced a full six-month deferral, including Belgium, Croatia, Cyprus, the Czech Republic, Hungary, Ireland, Luxembourg, the Netherlands, Sweden, and the UK.  However, Germany and Finland said they would not be deferring the deadline, while Austria said it would be implementing a three-month delay for technical reasons.

  • European Commission publishes blacklist in Official Journal
    • 25 June 2020, the European Commission’s Delegated Regulation (EU) 2020/855, which amends the list of high-risk third countries with strategic anti-money laundering and countering terrorist financing (AML / CTF) deficiencies that was produced under Article 9(2) of the Fourth Money Laundering Directive ((EU) 2015/849) (MLD4), was published in the Official Journal of the European Union.

      The new Delegated Regulation amends the Annex to Delegated Regulation (EU) 2016/1675 and comes into force on 9 July 2020. However, Article 2  – the Article adding third countries to the list – applies from 1 October 2020. The European Commission said the later date would give firms sufficient time to make the changes required to implement this provision.

      The Commission added a further 12 countries to its blacklist of high-risk third countries on 7 May. It also delisted six, which brings the total number of currently listed countries to 22. The Commission said the revised list took into account developments at international level since 2018 and was now better aligned with the lists published by the Financial Action Task Force (FATF).

      The 12 newly-listed countries were: The Bahamas, Barbados, Botswana, Cambodia, Ghana, Jamaica, Mauritius, Mongolia, Myanmar, Nicaragua, Panama and Zimbabwe. They joined Afghanistan, Democratic People's Republic of Korea (DPRK), Iran, Iraq, Pakistan, Syria, Trinidad & Tobago, Uganda, Vanuatu and Yemen. Meanwhile Bosnia-Herzegovina, Ethiopia, Guyana, Lao People's Democratic Republic, Sri Lanka and Tunisia were all delisted.

      On 2 June, the government of Mauritius issued a strongly worded communiqué protesting at its inclusion on the list of third countries. Along with the Bahamas and Barbados, Mauritius is objecting that it was given no opportunity to make representations before the list was published, contrary to the EU’s declared policy.

      It also pointed out that the Commission has simply taken its proposed list from the enhanced monitoring list maintained by the global Financial Action Task Force (FATF), without taking account of FATF's further classification of countries as 'grey listed' and 'black listed'. The FATF found that Mauritius was compliant with 53 out of 58 FATF-recommended actions, and the jurisdiction has already begun implementation of FATF's action plan with specific deadlines to comply with the remaining actions. It had initially committed to complete the exercise by end of 2020, and has since advanced the target completion date to August 2020.

      “[We are] determined to convince the EU to remove Mauritius from this list,” said the communiqué. “Mauritius was neither consulted nor heard, let alone informed that a new methodology had come into effect. The fundamental right of the states to be heard before an impactful decision is taken against their interests, has therefore not been respected, despite the fact that this fundamental right is clearly spelt out in Article 41 of the EU Charter of Fundamental Rights … The Commission further disregarded the fundamental principle of proportionality in failing to measure the seriousness of the consequences of including Mauritius on this list as compared to the actual risks posed to the EU financial system.”

  • FATF advances work on virtual assets and proliferation financing
    • 30 June 2020, the Financial Action Task Force (FATF) concluded its 31st plenary meeting by calling on its members to tackle new threats and vulnerabilities posed by criminals during the COVID-19 crisis. The FATF also completed a 12-month review of progress made by jurisdictions on implementing the new FATF standards on virtual assets that were adopted during the US presidency of the FATF.

      The FATF further agreed upon a draft text for consultation that will revise its standards to incorporate measures to counter proliferation financing, and adopted a report on money laundering and illegal wildlife trafficking.

      “The FATF’s work continues to grow in importance as bad actors across the world engage in illicit activity such as COVID-19 fraud, use of virtual assets to hide criminal activity, and many others,” said US Treasury Secretary Steven Mnuchin. “The US looks forward to the continued collaboration of the FATF and remains committed to strengthening the global financial system.”

      The FATF said attempts by criminals to profit from and exploit the Covid-19 pandemic through fraud was a concern to all nations fighting the disease. It had compiled case studies from around the world on different fraud schemes to assist law enforcement and governments in adopting best practices to address these threats.

      In respect of the growth of virtual assets as an alternative to traditional payment systems, the FATF said it had sought to address associated money laundering, terrorist financing, and proliferation financing (ML/TF/PF) risks. Virtual assets were associated with a range of criminal activity, including cybercrime and other cyber-enabled crimes, and high-volume vendors and buyers of narcotics. Criminals and other facilitators were increasingly using anonymity-enhancing technology and tools to disguise their transactional activity. Addressing this issue had been a priority of the US FATF Presidency.

      In June 2019, the FATF revised its standards to explicitly impose AML/CFT obligations on virtual assets and virtual asset service providers (VASPs) and undertook a 12-month review on the state of implementation. The review, which will be published on the FATF website, surveyed global implementation of the new FATF standards by governments and industry.

      The FATF Plenary also adopted a soon-to-be published report for the G20 Finance Ministers and Central Bank Governors on the AML/CFT and counter-proliferation financing (CPF) implications of so-called ‘stablecoins’. It further endorsed continued scrutiny of virtual assets by approving a second 12-month review for completion in 2021 and committed to providing updated guidance on virtual assets, including so-called ‘stablecoins’.

      The FATF agreed to seek public consultation on amendments to its standards that would require countries and their financial institutions and designated non-financial business and professions to identify, assess, and mitigate proliferation financing risk. These proposed revisions to the FATF standards would build upon the commitment made by FATF Ministers in 2019 to strengthen the global response to WMD proliferation financing by ensuring that members of the FATF Global Network had the proper tools to address the threat.

      The FATF further adopted a report to assist jurisdictions in combatting money laundering related to wildlife crimes. It estimated that this activity generated billions of dollars a year in criminal proceeds. The study found there was a need for an increased focus on financial investigations to combat these crimes and noted that the FATF standards provided a useful framework for countries to address these threats by strengthening their national laws and policies, their domestic and international cooperation, and their partnerships with the private sector.

      This plenary closed out the term of the FATF Presidency under China. From 1 July, Germany will hold the first two-year Presidency. The German Presidency said the FATF would focus on digital transformation in the AML/CFT space, combatting environmental crime and addressing new challenges of terrorism financing. It will also continue the work initiated under the Chinese Presidency and conclude the strategic review of the FATF, which is designed to make future mutual evaluations more timely, risk-based and effective.

  • Jersey tables draft beneficial ownership register scheme
    • 2 June 2020, the Jersey government tabled a draft Financial Services (Disclosure and Provision of Information) (Jersey) Law 2020 to create a new central register of beneficial owners, controllers and significant persons that is compliant with Financial Action Task Force (FATF) recommendations.

      The draft Law is intended to address a report published by EU anti-money laundering monitoring body Moneyval in 2016. The report gave Jersey a generally favourable assessment, but identified that additional work was required in respect of FATF Recommendation 24 on beneficial ownership of legal persons.

      The Jersey Financial Services Commission subsequently recommended the government to enact new company registry legislation and enhance its beneficial ownership and control requirements and additional registers. The new beneficial ownership register is intended to complement the development of a fully digital companies registry and centralise all mandatory disclosure of information in one place.

      The digital companies registry will capture information on companies, foundations, LLCs, LLPs, and incorporated and separated limited partnerships. However, limited partnerships will be exempt under the proposed legislation. The information contained on the central register will extend to all 'significant persons' and include company directors and nominee shareholders.

      The central register will be divided into a public (open register) and a private (closed register), with information such as company directors' details being made publicly available (although individuals can apply for their details to remain confidential), while beneficial ownership information will remain private.

      Last summer, Jersey, Guernsey, and the Isle of Man jointly committed to make their registers of beneficial ownership public by the end of 2023 to aligning themselves with European standards introduced in the Fourth and Fifth Anti-Money Laundering Directives.

      From 2021, the Crown Dependencies will interconnect corporate beneficial ownership registers with similar databases in the EU, enabling access to law enforcement officials and financial intelligence units. In 2022, access will be extended to financial service businesses and other companies obligated to conduct corporate due diligence for compliance purposes. The registers will finally be made public following the introduction of enabling legislation by 2023.

  • Kazakhstan ratifies the Multilateral BEPS Convention
    • 24 June 2020, Kazakhstan deposited its instrument of ratification for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS) with OECD Secretary-General Angel Gurría.

      With 94 jurisdictions currently covered by the Multilateral Convention or MLI, ratification by Kazakhstan brings the number of jurisdictions that have ratified, accepted or approved it to 48. For Kazakhstan, the MLI will enter into force on 1 October 2020.

  • Malta strengthens beneficial ownership rules for companies
    • 16 June 2020, the Companies Act (Register of Beneficial Owners) (Amendment) Regulations were brought into force under Legal Notice 247 of 2020 to provide the Registrar of Companies with further powers to investigate the ultimate beneficial ownership of the companies that are registered or are to be registered in Malta and to introduce an annual filing requirement with immediate effect.

      The Companies Act (Register of Beneficial Owners) Regulations, which came into force on 1 January 2018, introduced the obligation on all companies set up in Malta to file a declaration with the Registrar of Companies of all the beneficial owners of the company. The filing of such declaration was required upon the incorporation of the company and upon the change in the corporate structure or control of the company.

      However the Regulations imposed no obligation for the filing of supporting documentation in respect of a beneficial owner. The 2020 Amendment provides that a certified true copy of an official identification document for every beneficial owner must be submitted to the Registrar with the relative forms.

      The 2020 Amendment further provides that upon each anniversary of the date of registration, every Maltese company must file a return with the Malta Business Registry (MBR) either confirming there has been no change in the details of beneficial ownership or identifying any changes, including names, country of residence and official identification document numbers. This must be signed by a director or the company secretary and filed within 42 days of the company’s anniversary date.

      In the absence of an identifiable beneficial owner, a change in the senior managing officials listed by the company must be submitted a notice to the MBR within 14 days of the effective date of the change. Companies that fail to meet these requirements will be subject to a penalty of €5,000, together with a daily penalty of €100 until the breach is remedied.

      The 2020 Amendment provides that the Registrar can restrict new company incorporations if proposed directors already act as directors in other Maltese companies that have failed to submit information on beneficial owners. It is also empowered to request any information or documentation that it considers necessary to verify the beneficial information submitted. A Maltese company that fails to comply with any request made by the Registrar can be struck off the MBR with its assets passing to the government of Malta.

      The 2020 Amendment also strengthens the right of the Registrar to conduct on-sight inspections at the registered office of a company in order to verify beneficial ownership information provided to the MBR without any restriction. The Registrar must have access to any relevant documentation or any other information relating to information on beneficial ownership of any company and can take copies of the documents made available. If, following an inspection, the Registrar deems it necessary to update the beneficial ownership information, every officer of the company will be liable to a penalty not exceeding €100,000.

      Finally, the 2020 Amendment also imposes new obligations on company liquidators to keep a register of the beneficial owners of the company for a period of 10 years from the date of publication of the striking of the company’s name off the register.

  • Netherlands enacts beneficial ownership register law
    • 23 June 2020, the Upper House of the Dutch Parliament adopted the Bill (Implementatiewet registratie uiteindelijk belanghebbenden) to create a register for ultimate beneficial owners (UBOs) and implement the EU Fourth Anti-Money Laundering Directive (4AMLD). The EU deadline for implementation was 10 January, but the bill was delayed due to privacy concerns.

      The bill amends the Commercial Register Act 2007, the Money Laundering and Terrorist Financing (Prevention) Act and other related legislation. Registration is now mandatory for the following legal entities incorporated in the Netherlands:

      -Unlisted private and public limited companies


      -Associations with full legal capacity as well as associations with limited legal capacity operating a business

      -Mutual insurance associations


      -Professional, commercial and limited partnerships

      -European public limited companies (SE)

      -European cooperative companies (ECC)

      -European economic interest groupings that have their registered office in the Netherlands (EEIG).

      Entities existing and registered at the date the law comes into force must register their UBOs within 18 months. These entities will receive a notice from the Dutch Commercial Register to register their UBOs. Entities established or incorporated from that date will be obliged to register their UBOs at the time of registration and will not be registered until they have done so.

      An exemption applies to Dutch companies listed on any regulated market within the EEA or on any equivalent market outside the EEA, provided they are subject to certain disclosure standards, as well as their Dutch direct and indirect 100% subsidiaries.

      The Register will make the following details of UBOs accessible to the public: name; month and year of birth; state of residence,; nationality; nature and scope of the UBO’s interests in the entity (in bandwidths from 25% to 50%, 50% to 75%, and 75% to 100%). The day of birth, place of birth and country of birth, the home address, citizen service number and the UBO’s tax identification number must also be registered, but will only be accessible by the competent authorities and the Dutch Financial Intelligence Unit.

      The Law does not apply to trusts and mutual funds but the EU has since adopted 5AMLD, which requires national beneficial ownership registers to cover trusts as well as companies. A draft bill for registration of UBOs of these entities was published for public consultation on 17 April.

  • New Zealand addresses trust and land taxation in new finance Bill
    • 4 June 2020, the New Zealand government introduced a further finance Bill into parliament. The main purpose of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Bill is to “assist businesses on the road to economic recovery” but the Bill also includes amendments to the rules of trust taxation and land taxation.

      The proposals relating to the taxation of trusts include:

      -From 1 April 2020, a beneficiary of a trust who at the end of an income year is owed more than NZD25,000 by the trustee will become a settlor of the trust, unless interest at the market rate has been paid on the loan;

      -Trustees of a trust whose settlor has migrated to New Zealand may distribute accumulated trustee income to a beneficiary as exempt income, if the trustee has met its New Zealand tax obligations either by voluntary disclosure or by an election to pay tax on world-wide trustee income; and

      -Income derived by a minor beneficiary of a trust is no longer exempt from income tax and the trustees are required to pay tax on the beneficiary's behalf. This provision will be backdated to May 2012, but a savings provision will apply for people who took a tax position relying on the current law in a tax return already filed.

      The new land tax proposals affect the standard exemption from capital gains tax (CGT) on New Zealanders' main homes, along with the existing targeted exclusions for certain residential and business premises. The government believes that the current 'regular pattern' restrictions allow taxpayers who habitually buy and sell land to structure around the rules by varying each transaction so that there is no clear pattern of behaviour, or by using different people or entities to carry out separate transactions.

      The proposed amendments will seek to prevent this practice by extending the 'regular pattern' restrictions in the main home, residential and business premises exclusions to apply to a group of persons undertaking buying and selling activities together, rather than the activities of a single person.

      For the main home and residential exclusions, a group of people will be treated as undertaking buying and selling activities together when:

      -They all occupy all the properties together as their residence, and

      -Where a property is owned by a trustee or other entity and at least one of the people who occupy all the properties has significant control of the trust or other entity.

      The Bill was given a first reading on 24 June. Public submissions are now being invited with a closing date of 12 August.

  • OECD Global Forum said 100 countries carried out AEOI in 2019
    • 30 June 2020, international implementation of innovative transparency standards has moved countries ever closer to the goal of eradicating banking secrecy for tax purposes said the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes.

      Nearly 100 countries carried out automatic exchange of information in 2019, enabling their tax authorities to obtain data on 84 million financial accounts held offshore by their residents, covering total assets of €10 trillion.

      This represented a significant increase over 2018 – the first year of such information exchange – where information on 47 million financial accounts was exchanged, representing €5 trillion. The Global Forum said the growth stemmed from both an increase in the number of jurisdictions receiving information and the wider scope of information exchanged.

      The Common Reporting Standard requires countries and jurisdictions to exchange financial account information from non-residents obtained from their financial institutions automatically on an annual basis, reducing the possibility for offshore tax evasion. Many developing countries have joined the process and more are expected to join in the coming years.

      “Automatic exchange of information is a game changer,” OECD Secretary-General Angel Gurría, speaking before a plenary meeting of the OECD/G20 Inclusive Framework on BEPS. “This system of multilateral exchange created by the OECD and managed by the Global Forum is providing countries around the world, including many developing countries, with a wealth of new information, empowering their tax administrations to ensure that offshore accounts are being properly declared. Countries are going to raise much needed revenue, especially critical now in light of the current COVID-19 crisis, while moving closer to a world where there is nowhere left to hide.”

      Since the G20 declared an end to bank secrecy in 2009, the international community has targeted offshore tax evasion. Under the leadership of the Global Forum, which brings together 161 countries and jurisdictions committed to OECD tax standards, countries have ramped up global co-operation, first through exchange of information on request and through automatic exchange since 2017, implemented through more than 6,000 bilateral relationships worldwide in 2019, up from 4,500 in 2018.

      A November 2019 OECD study showed that wider exchange of information driven by the Global Forum had been associated with a global reduction in foreign-owned bank deposits in international financial centres (IFC) by 24% (USD410 billion) between 2008 and 2019. Voluntary disclosure programmes, offshore tax investigations and related measures, both before and after the start of automatic exchange in 2017, had also led to the identification of more than €100 billion of additional tax revenues worldwide.

  • Thailand joins international efforts against tax evasion and avoidance
    • 3 June 2020, Thailand became the 137th jurisdiction to sign the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, the primary instrument for swift implementation of the Standard for Automatic Exchange of Financial Account Information in Tax Matters (CRS).

      The CRS – developed by the OECD and G20 countries – enables more than 100 jurisdictions to automatically exchange offshore financial account information through a wide range of mutual assistance mechanisms: exchange of information on request, spontaneous exchange, automatic exchange, tax examinations abroad, simultaneous tax examinations and assistance in tax collection. It guarantees extensive safeguards for the protection of taxpayers' rights.

      Beyond the exchange of information on request and the automatic exchange pursuant to the Standard, the Convention is also a powerful tool in the fight against illicit financial flows and is a key instrument for the implementation of the transparency standards of the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project.


  • US and Curacao agree to exchange country-by-country tax reports
    • 12 June 2020, the US Treasury announced that the US and Curaçao had signed a competent authority agreement permitting the exchange country-by-country (CbC) reporting data on large multinational groups. The new agreement went into force on 14 May, the date of its signature.

      The agreement will allow the two countries’ tax authorities to acquire information about large multinationals operating in their countries to help determine if multinationals might be engaging in tax avoidance through inappropriate transfer pricing or other means.

      The country-by-country reporting system was established under Action 13 of the OECD/G20 base erosion and profit shifting (BEPS) plan. Both the US and Curaçao are members of the Inclusive Framework on BEPS, a coalition of over 130 countries that have pledged to implement country-by-country reporting and other ‘minimum standards’ resulting from the BEPS project.

  • US pulls out of digital tax negotiations
    • 12 June 2020, US Treasury Secretary Steven Mnuchin announced that the US was pulling out of negotiations on digital taxation with European Union officials after they failed to make any progress, choosing instead to threaten retaliatory tariffs on countries that impose digital services taxes.

      In a letter sent to the UK, Spain, France and Italy, Mnuchin said that negotiations had reached an “impasse” with respect to ‘pillar one’ – the unified approach to profit allocation in the digital economy – and that, in the time of the Covid-19 crisis, governments should not attempt to “rush such difficult negotiations”.

      A US Treasury spokeswoman clarified that the US had proposed pausing – not ending – talks among OECD countries on digital taxes and setting rules for international taxation. Mnuchin said also that he hoped for agreement in the OECD-led process on pillar two – the global anti-base erosion (GloBE) proposal.

      US Trade Representative Robert Lighthizer said investigations were underway to determine whether digital services taxes being adopted or considered by 10 countries – Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey and the UK – amounted to unfair trade practices. If it finds they do, the US government could impose new tariffs.

      In a joint response, the governments of the UK, France, Italy and Spain offered to reduce the scope of their digital services tax if the US promised to come back to the negotiating table on a global proposal. They said it would “considerably ease the task of achieving a consensus-based solution and make a political agreement within reach this year”.

      The statement said: “We have always been clear that our preference is for a global solution to the tax challenges posed by digitalisation, and we’ll continue to work with our international partners to achieve that objective.” The four nations are now offering to take a “phased approach” to taxing “automated” technology companies.

      Meanwhile the OECD confirmed that it would continue its work to develop a multilateral approach to the taxation of digital services. In a statement, it said it had been mandated by the G20 to deliver a consensus-based solution by the end of 2020 based on the two-pillar approach. It would maintain its schedule of meetings, offering the 130+ country coalition known as the Inclusive Framework on BEPS, an opportunity to design a multilateral approach to the taxation of digital firms.

      “All members of the Inclusive Framework should remain engaged in the negotiation towards the goal of reaching a global solution by year-end, drawing on all the technical work that has been done during the last three years, including throughout the COVID-19 crisis,” said Secretary-General Angel Gurría.

      Gurría again warned that unless multilateral agreement on a way forward for digital firms taxation is achieved, countries would enact unilateral measures to tax these firms, which would in turn trigger tax disputes and trade wars.


  • USTR initiates investigations into digital services taxes
    • 2 June 2020, the Office of the US Trade Representative (USTR) announced it had initiated investigations into digital services taxes proposed or adopted in Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey and the UK.

      The investigations will be conducted under Section 301 of the 1974 Trade Act. This provision gives the USTR broad authority to investigate and respond to a foreign country's action which may be unfair or discriminatory and negatively affect US Commerce. It is seeking comments from interested parties by 15 July.

      The USTR is concerned that the digital services tax regimes in these countries may target US-based technology companies and may be actionable under section 301 of the Trade Act of 1974. If so actionable, the USTR will determine what type of retaliation the US should take. In December 2019, the USTR held that France’s digital services tax was discriminatory and proposed retaliatory tariffs on French luxury goods of up to 100%.

      The USTR said that in assessing the ten tax schemes, it would focus on discrimination against US companies, retroactivity and unreasonable tax policy. With respect to unreasonable tax policy, the USTR noted that digital service taxes may diverge from norms reflected in the US and international tax systems by being extraterritorial, taxing revenue not income and penalising tech companies for commercial success.

      "President Trump is concerned that many of our trading partners are adopting tax schemes designed to unfairly target our companies," said USTR Robert Lighthizer. "We are prepared to take all appropriate action to defend our businesses and workers against any such discrimination."

      The OECD is working with over 130 countries to reach an agreement by year-end on an update to the international tax rules that would increase the amount of taxes paid by digital firms; but reaching an agreement has been made more difficult largely because the US changed its position on a compromise approach late into the negotiation. It is expected that if an international agreement is reached in the OECD-led process, most if not all countries that have adopted digital services taxes will repeal their taxes and replace them with the agreed-to approach.


  • Zambia terminates tax treaty with Mauritius
    • 22 June 2020, the Zambian government announced that the Double Taxation Agreement (DTA) between the government of the Republic of Zambia and the government of the Republic of Mauritius would be terminated with effect on 31 December 2020, following approval by the Zambian Cabinet.

      The treaty came in force on 15 June 2012 and covers income from a number of specific sources, such as business income, dividends, interest and royalties. The current treaty further gives exclusive taxation in the country of residence of receipt of income.

      In the Cabinet statement, the Zambian government stated that it did not retain taxing rights to tax dividends, interest and royalties arising in Zambia and payable to residents of Mauritius. It intends to initiate negotiations for a new DTA that will introduce shared taxing rights and anti-abuse clauses.

      The DTA requires the parties to the agreement to give notice to terminate by 30 June of the calendar year, provided the treaty has been in force for at least five years. Once notice is given, the treaty will cease to apply on the last day of the calendar year for Zambia and on 1 July of the following calendar year for Mauritius.

      Zambia is the second African nation to terminate its DTA with Mauritius on a unilateral basis. Last year Senegal terminated tax treaty with Mauritius, which was signed in April 2002 and entered into force in September 2004. In accordance with Article 29 of the treaty, it continued to apply in Senegal until 31 December 2019 and in Mauritius until 30 June 2020.

      The government of Senegal said the agreement was “unbalanced” and had led to the loss of USD257 million in revenue since 2004. It had warned Mauritius that it would be forced to terminate the treaty if certain conditions were not met.

      Last year the Mauritius-Kenya tax treaty was invalidated by the Kenya High Court for failing to follow parliamentary procedure during the ratification process. Several other African nations, including Lesotho, Uganda and the Republic of Congo, are also seeking to renegotiate their tax treaties with Mauritius.

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