Singapore Chartered Tax Professionals (SCTP)’s Post

Global Minimum Tax: From Race to the Bottom to Race to the Top? The global tax landscape is shifting seismically. As we approach the implementation of the OECD's Pillar Two Global Minimum Tax, are we witnessing the end of the "race to the bottom" in corporate taxation? Key Insights: Unintended Consequences: Some jurisdictions are raising their corporate tax rates to the 15% minimum. Example: Hong Kong's proposed increase from 8.25% to 15% for certain companies. Substance Over Form: The focus is shifting from nominal rates to effective tax rates. How will this impact transfer pricing and substance requirements? Top-Up Taxes: Countries like the UK and Germany are implementing qualified domestic minimum top-up taxes (QDMTT). Will this spark a new form of tax competition? Compliance Complexity: The GloBE Information Return adds a new layer of reporting. How are MNEs preparing their systems and processes? Digital Services Taxes: With Pillar One still in flux, how will existing DSTs interact with the global minimum tax? Carve-outs and Exceptions: The substance-based income exclusion may lead to strategic relocations. Are we seeing a new "race to the top" in attracting substantive business activities? Food for Thought: Could the global minimum tax paradoxically lead to more aggressive tax planning within the new framework? What's your take? How is your organization adapting to this new paradigm? #GlobalMinimumTax #InternationalTax #CorporateStrategy #TaxPolicy

"Because Pillar One is focused on changing where profits are taxed, including for many large digital companies, DSTs are expected to be repealed in a transition process anticipated to be completed by June 2024. However the OECD missed the March 31 deadline to reach an agreement on the text of Pillar One, casting doubts on when or if DSTs would ever be repealed." Mais importante: "(...) in March 2024, the U.S. Treasury held a public hearing where a Joint Committee on Taxation staff report was discussed showing that Pillar One would result in a loss in U.S. federal receipts of $1.2 billion." Pilar I a abanar... #DST #TAX #digitalservices #OECD

From Jan 1, 2024, gains received in Singapore from the sale of foreign assets will be treated as income chargeable to tax, based on the newly enacted section 10L of the Singapore Income Tax Act 1947. It is crucial for businesses to assess the potential impact section 10L can have and take the necessary steps.    In this article published on The Business Times, Baker Tilly Singapore’s Siew Moon Sim, Senior Partner, Head of Tax and Vin Wee Lee, Tax Partner, delve into the complexities of section 10L and what businesses should be mindful of moving forward.   Read the article here: https://lnkd.in/g_eXNmeD   #NowForTomorrow #GreatConversations #BakerTillySG #Tax #section10L

In today’s interconnected world, the complexities of international tax policies often lead to double taxation, where the same income is taxed twice—once in the country where it’s earned and again in the country of residence. Double Taxation Avoidance Agreements (DTAA) address this challenge, fostering fair tax practices and encouraging cross-border trade and investment. By outlining tax obligations, these treaties provide mechanisms such as tax exemptions, credits, and deductions, ensuring taxpayers—individuals, businesses, and governments—can avoid the burden of paying taxes twice. DTAA is pivotal for ex-pats, multinational companies, and investors, creating a favorable environment for global economic cooperation and reducing legal uncertainties. For individuals, DTAA reduces tax burdens, simplifies compliance, and promotes better financial planning. Businesses gain clarity in tax liabilities, enabling smoother international operations. Countries benefit from enhanced bilateral relations and increased foreign investments. However, taxpayers must navigate complex compliance processes and stay updated on evolving treaties. With the rise of digital economies, DTAAs are adapting to new challenges, ensuring fairness in taxation and addressing global fiscal issues. Read more in this blog: https://lnkd.in/dGhDzeCA #walcy #crossborderpay #DoubleTaxation #InternationalTaxation #DTAA #GlobalTrade #TaxPlanning #FinancialStrategy

OECD Pillar Two – Adjusted Covered Tax As mentioned in my earlier post, for determining the effective tax rate of the entities in a particular jurisdiction under OECD Pillar two, the Adjusted Covered tax for jurisdiction is divided by the GloBE income calculated for that jurisdiction. The concept of “covered taxes” expands beyond traditional income taxes used in financial reporting. Covered taxes include not only corporate income taxes but also other taxes that impact the tax base of Multinational Enterprises. Some examples of covered taxes include the following: - Taxes in substitution of corporate tax: In certain jurisdiction, different type of taxes are levied in substitution of corporate tax for example withholding tax on payments made to foreign entities (e.g., dividends, interest, royalties) where normal tax is not levied or tax computed on deemed income such as tonnage tax income. - Deemed Dividends: Some jurisdictions tax deemed dividends, even if not distributed, to prevent profit shifting. - Others: Deferred taxes, taxes related to retained earnings, corporate equity, and components based on income and equity. However, taxes such as Consumption tax, Excise taxes on inputs, Digital services taxes, Stamp duty, Ad valorem taxes, Payroll taxes, Property taxes would not be included in covered taxes After considering the covered taxes, adjustment would be required for taxes on income and expenses which have been adjusted while computing GloBE Income. Each jurisdiction may have additional taxes specific to its regulations. For example, India taxes deemed dividend income, while Singapore does not taxes dividend distributed by Singapore Company. Accordingly, understanding the tax landscape in each jurisdiction is crucial. You can reach out to us in case of any query: Jay Mange: jay.mange@transactionsquare.in Vikram Naik: vikram.naik@transactionsquare.in   #OECDPillarTwo #coveredtaxes #taxreporting #incometaxes #corporatetaxes #taxbase #TaxReform #GlobalTax #InternationalTaxation #OECDGuidelines #BEPS Transaction Square Girish Vanvari Vikram Naik Amol Khanna Saloni Khandelwal Chirag Shah Fahad Dossani

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

🚨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

Taiwan has since 1 January 2023 implemented controlled foreign corporation (CFC) rules to prevent tax avoidance by taxing income earned by foreign entities controlled by Taiwanese residents. The CFC reporting season is upcoming in May 2024, the month of income tax filing. In this article, we explore some uncertainties around the CFC rules and reporting requirements, which may raise concerns when it comes to implementation, as well as the effect of CFC rules on international wealth planning. Key contacts Senior Partner Edmund Leow, SC Partner Vivien Teu Partner Ling Yi Quek #SingaporeLawUpdates #Taiwan #controlledforeigncorporation #tax

OECD's Pillar 1 and Pillar 2 initiatives strive to overhaul global tax regulations, ensuring fairer profit allocation to market jurisdictions and instituting a global minimum tax rate. These measures aim to reduce tax avoidance and ensure multinational corporations contribute their fair share to the global economy. Let journey through this landscape together # Transferpricing

The OECD Tax have published their “2024 Progress Report on Tax Co-operation for the 21st Century”. Notably, the report concludes that the reporting system and processes for Global Minimum Tax requirements should be brought within a MNE’s Tax Control Framework. This would then allow tax administrations to explore a systems based risk assessment for #GloBE compliance. Now is the time to be thinking about the governance surrounding new GloBE calculations to ensure they can be converted into an explicit standardised set of procedures to extract and adjust the underlying accounting data. #Governance #BEPS #Pillar2 #Tax