The Committee of Experts on International Cooperation in Tax Matters of the UN has published the report on its fifteenth session held during last October in Geneva. The Session discussed several substantive issues related to international cooperation in tax matters, including the updating of the UN Model Double Taxation Convention between Developed and Developing Countries, and other issues in tax practice of developing countries, and procedural issues for the Committee.
The 2017 update mainly refers to the inclusion of base erosion and profit shifting (BEPS) considerations. According to the report, the most relevant changes could be classified into three categories: (a) general anti-abuse rules; (b) more targeted anti-abuse rules; and (c) changes to the definition of permanent establishment. The 2017 update of the Model Convention also updated the commentary on article 1 to explain the relationship between anti-abuse rules and a tax treaty and included a new commentary on the principle purpose test rule and the limitation on benefits clause. In addition, another change introduced in the 2017 update of the Model Convention was the new article 12 A dealing with the taxation of fees for technical services, which was discussed in more detail during discussions on the tax consequences of the digitalized economy — issues of relevance for developing countries.
The most notable issue is the tax consequence of the digitalized economy in developing countries. A Subcommittee on Tax Challenges Related to the Digitalization of the Economy was formed to deal with both the tax challenges of the digitalization of the economy and the tax administration issues related to the digitalized economy, including identifying current issues, development, and give suggestions. The Subcommittee will report on its activities, recommendations and conclusions at each Committee session with an initial response on issues, possible options and working methods for consideration by the sixteenth session in May 2018.
Another significant issue discussed is the possible update of the UN Practical Manual on Transfer Pricing for Developing Countries (UN TP Manual), the latest version having been released back in 2017 April. A new Subcommittee on Article 9 (Associated Enterprises) was formed, which is expected to review and update the UN TP Manual and give due consideration to the outcome of the OECD/G20 Action Plan on Base Erosion and Profit Shifting as concerns transfer pricing. The Manual shall reflect the special situation of least developed economies.
Other issues discussed include environmental tax issues, possible update of the handbook on extractive industries taxation issues, treatment of collective investment vehicles, mutual agreement procedure, capacity building etc.
With the fast growth of China’s economy and the continuous improvement of the comprehensive strength of domestic enterprises, as well as the implementation of the “One Belt, One Road” policy, an increasing amount of Chinese enterprises are beginning to expand their global footprint and establish their presence in Europe.
TPA Global has developed a practical roadmap of 6 steps meant to guide CFOs in their Journey of rising above troubles to reach a situation of full control. These steps are presented in a series of short video clips (3-5 minutes):