back to updates & publications

(CORPORATE TAX) THE OECD ISSUES THE 2018 PROGRESS REPORT ON PREFERENTIAL REGIMES (HARMFUL TAX PRACTICES)

Following the report Addressing Base Erosion and Profit Shifting (BEPS) in February 2013, OECD and G20 countries has adopted an Action Plan to address BEPS. The Action Plan has determined 15 actions along three key points: introducing coherence in the domestic rules that affect cross-border activities, reinforcing substance requirements in the existing international standards, and improving transparency and certainty.

BEPS Action 5 is one of the four BEPS minimum standards applicable to all members of the Inclusive Framework on BEPS and any jurisdictions of relevance. So far 127 jurisdictions have joined the Inclusive Framework and three jurisdictions of relevance have been included in the review process. Since the beginning of the BEPS project, the Forum on Harmful Tax Practices (“FHTP”) has reviewed a significant number of preferential regimes, publishing the results in the several reports, including the 2017 Progress Report (OECD, 2017). In 2017 more than 80 regimes were committed to be complied with the BEPS Action 5 minimum standard, followed by the fulfilment. In addition, the FHTP has reviewed the preferential regimes of new Inclusive Framework members, as well as newly introduced regimes, by the total number of 255.

The current results indicate that all IP regimes, except for one, are either eliminated or amended in compliance with the nexus approach and other standards.

The amendments have mostly considered the transparency in order to ensure that the conditions for entry to the regime are clear and known in advance, provided that all the previous provisions would end by 30 June 2021 at the latest.

In 2018 the Inclusive Framework advanced the new standard for substantial activities requirements within no or only nominal tax jurisdictions, ensuring a level playing field between those introducing substantial activities requirements in preferential regimes, with those offering a general zero or almost zero corporate tax rate.
Additionally, a number of important issues, including the revision of the key factors and providing guidance on the application of these factors for assessing regimes have been clarified in light of the BEPS project and the FHTP’s experience.

Further, the FHTP has published the Progress Report 2018 (OECD, 2018), where it also sets out the steps to be undertaken in 2019. This includes the new global standard on substantial activities, harmful tax practices, such as the application of the low effective tax rate factor, territorial tax systems, digital economy, as well as their implementation.

The full report can be downloaded on this link: OECD PROGRESS REPORT 2018

Download the report in .pdf

For further details on this update, kindly contact:

Franco Falzon C.P.A, LL.M
(Managing Partner)
E: franco@ffinternational.com.mt

T: +356 2010 7771

Disclaimer

While FF International Limited (hereinafter referred to as “FFI”) endeavours to ensure that any information published in articles / publications / memos / updates (including any information published on our website) is accurate as at the time of publication, FFI nor any of their respective directors, partners, officers, employees, or agents make any representation or warranty (express or implied) or accept or will accept any responsibility or liability in relation to the accuracy or completeness of the information contained published in our articles / publications / memos / updates (including any information published on our website) or any other written or oral information made available or published on our articles / publications / memos and updates. Any responsibility or liability in respect of any such information or any inaccuracy or omission arising from any article / publication / memo is expressly disclaimed. In particular, but without prejudice to the generality of the foregoing, no representation or warranty is given as to the achievement or reasonableness of any future projections, estimates, prospects or returns published on our articles / publications / memos / updates (including any information published on our website) . The content of the above article / publication / memo / update and any information published on our website is intended to serve solely as general information only and its purpose is not to provide any specific professional advice whether of a financial, legal, tax or other nature. Since it is recommended that business decisions be based only on qualified professional advice, neither FFI nor any related company belonging to FFI nor any of the respective directors, partners, officers, employees, or agents of FFI will be held liable for any damages which might result as a consequence of relying on the information contained within. FFI including any directors, partners, officers, employees, or agents of FFI and / or any entity related to FFI accept no liability whatsoever for the content of this article / publication / memo / update for the consequences of any actions taken on the basis of the information provided. If you have any questions relating to the accuracy and correctness of the above article / publication / memo / updates or any information published on our website you are kindly requested inform us by sending us an email on info@ffinternational.com.mt