18 October 2024 Global Tax Policy and Controversy Watch | October 2024 edition The United States (US) Internal Revenue Service is intensifying transfer pricing compliance efforts, and a US Supreme Court ruling has overruled Chevron deference, mandating courts to independently interpret statutes rather than deferring to agency interpretations. These developments underscore the need for a thorough review of transfer pricing practices. An updated version of the digital services tax (DST) jurisdiction activity summary, current as of 25 September 2024, is now available. The summary outlines the status, scope, rate, thresholds, exclusions, and effective dates of DSTs in 27 jurisdictions. The reports from the simplified peer review indicate that most jurisdictions participating in the process either have or are working to establish a policy framework for the mutual agreement procedure (MAP), as well as a robust MAP program, and are willing to take the necessary measures to achieve the efficient, effective and timely resolution of disputes. The simplified review process is designed for jurisdictions that do not have "meaningful MAP experience" and that opt not to undergo the full peer review process. The review determined that 115 jurisdictions around the world have country-by-country reporting rules in place and 93 jurisdictions have multilateral or bilateral competent authority agreements for the exchange of such reports. Companies should expect the information provided in the country-by-country reports they file with one tax authority to be shared with other tax authorities and should be prepared for the use of these reports for other purposes, including for purposes of the global minimum tax rules of Pillar Two. The Argentine government has published rules for implementing the Incentive Regime for Large Investments, referred to as RIGI. The decree provides details on the sectors to which the RIGI will apply and minimum investment amounts in computable assets per sector and subsector. In general, the US$200m minimum established in the Bases Law is maintained for all sectors. For the oil and gas sector, the minimum is increased to US$600m for offshore projects and gas for export, and to US$300m for transportation and storage projects. On 12 September 2024, the Australian Government introduced the first tranche of reforms to the Privacy Act of 1988 into Parliament. The bill is the latest development in a four-year process, following a review by the Attorney General's Department, stakeholder consultation and the government's response. If enacted, the Bill would enhance privacy protections for individuals. The 2024 tax reform bill proposes, in part: (i) a progressive corporate income tax rate and a phased reduction of the marginal rate (35%); (ii) an increase in the minimum tax rate from 15% to 20%; and (iii) an increase in the capital gains tax rate from 15% to 20%. The published consultation on the taxation and deductibility of interest by businesses in Ireland is wide ranging and includes 26 questions. It also requests detailed observations around the design of a reformed interest deductibility regime. The consultation period closes on 30 January 2025. Ireland's Tax Appeals Commission ruled that the cost of stock-based awards (SBAs) should be borne by the US parent company, not its Irish subsidiary; as such, the Irish subsidiary did not need to include the SBAs in its cost base for the transfer pricing calculation. This is the first transfer pricing case decided by the Commission after Ireland's formal adoption of transfer pricing legislation in 2011. The Irish Government presented Budget 2025 on 1 October 2024. The Budget provided for a total package of €10.5b, split across expenditure increases (both current and capital), a cost-of-living package and tax measures. This is the final Budget of the current Government. A general election is expected no later than March 2025. The Finance Bill 2024, which will include legislation giving effect to the measures presented in the Budget, is scheduled for release on 10 October 2024. Legislation has been enacted in Italy that will require many large multinationals to publicly disclose certain income-tax-related information for jurisdictions where they do business. The new reporting requirements apply to financial statements relating to financial years beginning on or after 22 June 2024. The Italian Council of Ministers has approved a legislative decree containing supplementary and corrective provisions to the Cooperative Compliance regime, which entered into force on 4 January 2024. The amendments introduced by the corrective decree will have significant implications for efforts to encourage new taxpayers to participate in the Cooperative Compliance regime. On 17 September 2024, the Dutch Government published its budget proposals. Enactment of the final proposals, if approved by Parliament, is expected in December 2024. The coalition parties expressed the importance for a stable and predictable fiscal policy and investment climate. On 13 September 2024, Peru enacted a 1% rate for the excise tax applicable to online gaming and online sports betting that was previously introduced in 2022. The tax will come into force when its regulations are enacted. Slovakia will tax sweetened nonalcoholic drinks and concentrates, beginning 1 January 2025. The new law will tax high-caffeine beverages at a higher rate than sweetened drinks. Manufacturers or suppliers must pay the new tax at the point of the first distribution. The Court of Justice of the European Union has held that Sweden's imposing withholding tax on dividends paid to foreign public pension funds, while allowing dividends to pass tax-exempt to Swedish public pension funds, is contrary to the free movement of capital. Based on the decision, foreign public pension funds and state investors that have paid Swedish withholding tax will want to assess whether to file a reclaim. The recently proposed corporate alternative minimum tax (CAMT) regulations, issued on September 12, 2024, offer guidance for determining whether a corporation is an "applicable corporation" subject to the CAMT and computing an entity's adjusted financial statement income (AFSI). The AFSI computations, however, are significantly complicated. The proposed regulations also contain guidance on determining the CAMT foreign tax credit. The United Kingdom (UK) government has announced a package of reforms aimed at delivering on the agenda of the new government. The government has indicated that it would like to increase the use of electronic invoicing (e-invoicing) and will launch a consultation on this topic. A new Digital Transformation Roadmap, expected in Spring 2025, will set out the UK tax authority's vision to be a digital-first organization. IRS representatives have recently addressed the agency's current approach to asserting penalties in transfer pricing cases, saying that both the documentation and method of transfer pricing must pass muster. Taxpayers should proactively review their transfer pricing policies and documentation to comply with the latest IRS standards and expectations.
Document ID: 2024-1919 | ||||
