Joao Espanha’s Post

"For a zero-tax jurisdiction, there is a strong case for adopting a broader tax on profit, beyond the backstop of GloBE" A recent IMF Working Paper suggests that a well-designed profits tax system with international tax and anti-avoidance provisions could be the answer to effective revenue collection. The Paper also notes that there is a strong case for adopting #QDMTT and #IIR rules to provide for effective revenue collection mechanisms without disadvantaging investment. However, the implementation of UTPR remains uncertain for its questionable consistency with tax treaties and requirement of higher level of administrative cooperation. For zero-tax jurisdictions, adopting a broader tax on profit may be a more favorable option with #GloBE top-up taxes as a backstop. This approach ensures compliance with legal requirements like economic substance and avoids the application of #STTR. While implementing GloBE as a top-up is straightforward for low-tax countries with a general CIT, there are questions about how to improve the system with #Pillar2 by revisiting the CIT rate and base. To learn more, check out the IMF Working Paper: https://lnkd.in/gcXd83NR #internationaltax #BEPS

Insights about profit tax design and minimum corporate tax rules (GloBE) in low-tax jurisdictions.

Among other points highlighted by the realeased OECD Report for the G7 Finance Ministers and Central Bank Governors one maybe has a distinct note for tax authorities but expecially taxpayers. Namely, potential initiatives that would remove duplicate measures targeting the same elements. This in a tax rules’ landscape that has become increasingly admin burdensome to navigate. The document states “[…] many jurisdictions have existing measures either stemming from the BEPS Action Plan or their own domestically developed rules to address similar cross-border concerns. Some of these measures may become partially duplicative as the Global Minimum Tax addresses the relevant policy concerns which motivated the adoption of these measures in the first place. The relevant set of measures that countries might have in place include both substantive and reporting rules. A re-evaluation of the corporate tax system against the backdrop of the implementation of the Global Minimum Tax and new policies for growth would consider whether there is scope for streamlining existing duplicative rules that target the same policy concerns.” The document mentions several examples including Mandatory Reporting Rules (everybody expecially in Europe remembers DAC6 Directive now included in daily admin work). https://lnkd.in/eUzUJz7k

[COMING SOON] 𝐶𝑜𝑟𝑝𝑜𝑟𝑎𝑡𝑒 𝑇𝑎𝑥 𝑆𝑡𝑎𝑡𝑖𝑠𝑡𝑖𝑐𝑠 2024: Stay tuned for data on corporate income tax, MNE activity, BEPS practices, tax rates, & more!   This publication is a key output of Action 11 of the OECD/G20 BEPS Project, which has helped to improve the measurement and monitoring of multinational tax avoidance. It includes data on corporate tax rates, revenues, effective tax rates, tax treaties, and tax incentives for R&D and innovation amongst other data series. The publication also includes anonymised and aggregated Country-by-Country Reporting (CbCR) data providing an overview of the global tax and economic activities of thousands of MNE groups operating worldwide. The 2024 edition presents new data series on IP regimes, BEPS implementation, the distribution of low-taxed profit, as well as the 2021 CbCR data.   🗓️ Available 11 July 2024 🕚 11:00 CEST   ➡️ https://oe.cd/corptaxstats   #CorpTaxStats #OECDtax #OECD #tax #CorporateIncomeTax #CIT #data #internationaltax #MNEs #GlobalMinimumTax #CbCR #BEPS #RandD #ETR #data #taxavoidance #internationaltax

🚀 BREAKING NEWS: International Tax Reform Takes a Bold Step Forward with Amount B of Pillar One! 🚀 The OECD/G20 Inclusive Framework on BEPS has just dropped a game-changing update with the release of the Model Competent Authority Agreement (MCAA) for Amount B of Pillar One. This is a monumental leap towards simplifying transfer pricing and reducing tax disputes globally, and it’s something every tax professional and multinational enterprise should have on their radar. 📊 💡 What’s the Buzz About? 🔥 Simplified Transfer Pricing for Marketing & Distribution: The MCAA brings a more straightforward and streamlined framework for baseline marketing and distribution activities. This means less confusion, fewer disputes, and more efficiency for businesses worldwide. 🎯 Say Goodbye to Double Taxation Issues: With a political commitment from Inclusive Framework members to prevent double taxation, this agreement is set to create a more predictable and fairer tax landscape for cross-border investments. 🌍 A Win for Low-Capacity Jurisdictions: This model is especially beneficial for jurisdictions with limited resources, offering a clear path to navigate the complexities of transfer pricing with ease. 💥 Why This Matters Right Now: This is not just another tax update – it’s a massive stride towards global tax harmony. As an international tax expert, I can tell you this will impact businesses of all sizes, bringing clarity, certainty, and a more balanced approach to transfer pricing. 📈 💥 Want to Be Ahead of the Game? Check out the full report and MCAA documents I've attached for an in-depth understanding of how this will reshape the tax world. ✨ Let's get this conversation going! How do you think this change will impact your business? Share your thoughts or drop a comment below! #TaxReform #TransferPricing #BEPS #PillarOne #AmountB #OECD #InternationalTax #ViralPost #TaxTrends

Pillar Two: Articles 3.2.4 and 4.1.2(d) - Qualified Refundable Tax Credits (“QRTC”) QRTC is a fiscal tool where a relevant government offers taxpayers a tax credit to offset their taxes for engaging in specified activities (e.g. R&D) or incurring specified expenditure. Any unused tax credit (within 4 years from the start of entitlement to such credit) will be payable in cash to taxpayers. Article 3.2.4 states that the full amount of QRTC will be treated as GloBE Income/ Loss (denominator) in the year such entitlement accrues. Given QRTC is meant to offset a taxpayer’s tax liability, it logically has already reduced the taxpayer’s the current tax expense in the financial account. Therefore, Article 4.1.2(d) allows an adjustment to increase the taxpayer’s Adjusted Covered Tax (numerator) by the same amount of QRTC added to the GloBE Income/ Loss (denominator). To illustrate: 1. A Co’s domestic tax rate is 15%, and has a taxable income of $1,000. So its tax liability is $150 ($1,000 x 15%). 2. A Co has $20 QRTC, which can be used to set off against its tax liability. A Co’s domestic tax liability is therefore reduced to $130. 3. Without the application of Articles 3.2.4 and 4.1.2(d), the Pillar Two effective tax rate (“ETR”) of A Co is 13% ($130/$1,000). 4. With the application of Articles 3.2.4 and 4.1.2(d), the $20 QRTC is added to both numerator and denominator. This will increase A Co’s Pillar Two ETR to 14.7% ($150/$1,020). How does the above relevant to Singapore? In Budget 2024, Singapore has introduced the Refundable Investment Credit (“RIC”) with the intent of making it a QRTC. While we wait for more guidance on RIC, it is for sure a welcoming move by the government to add RIC in its fiscal toolkits to maintain (and enhance) the nation’s competitiveness in attracting foreign direct investment. Note: The above is just my personal sharing.#beps #pillartwo

Implementation of BEPS framework was expected to start from 2023-24. Know more status of implementation in different countries https://lnkd.in/g_CkybuX #GCC #global #tax #BEPS #markaz #marmoreresearch

🚨Just released! Our new International Monetary Fund Working Paper: Deciphering the GloBE in a Low Tax Jurisdiction, which offers new and complementary analysis on the OECD-led global minimum tax rules. It was a privilege to be able to work closely with Shafik Hebous and Andualem Mengistu (two exceptional IMF economists) on this blended economic and legal paper. The paper makes the case that: 1️⃣ It is difficult to design rules that trigger exactly the bare minimum tax intended by the GloBE rules in all cases, and motivates that this should not be the policy and legal design objective anyway. 2️⃣ A low tax jurisdiction—especially one with no existing tax system—should consider adopting a well-designed profit tax system, with that underlying profit tax regime to be backstopped by the minimum top-up tax rules themselves (being, a QDMTT, and possibly an IIR), with possible separate legal implementation. 3️⃣ When developing a well-designed profit tax system, it is important to keep in mind that the equivalence between different economic rent tax designs is not maintained under the GloBE rules as drafted. This has important implications for the future design of profit tax regimes globally, especially when seeking—for example—to reduce the existing debt equity bias. You can access the paper here: https://lnkd.in/euPH9A9c #taxes #internationaltax #imf #minimumtax #pillartwo

📢 France Eyes 5% Digital Services Tax (DST) Hike for 2025 Budget! France is proposing an increase in its Digital Services Tax to 5%—up from the current 3%—aiming to boost revenue by over €500 million. This shift, part of the 2025 Finance Bill, targets major digital firms while the world awaits OECD’s Two-Pillar global tax solution. Will this lead other nations to follow suit? 🇫🇷💸 Explore the full details here: https://lnkd.in/dCYPyMhf #DigitalTax #France #DST #IndirectTax #FinanceBill2025 #VAT #TaxPolicy