Six countries, namely India, China, Israel,
New Zealand, Canada and Iceland, signed a Multilateral Competent Authority
agreement for the automatic exchange to boost transparency by multinational
enterprises (MNEs). The signing ceremony took place in Beijing on 12 May 2016. With
this, the total number of signatories came up to 39.
Highlights
v
The
pact allows all signatories to bilaterally and automatically exchange
Country-by-Country Reports ("CbC MCAA") with each other, as
contemplated by Action 13 of the BEPS Action Plan.
v
It
will help ensure that tax administrations obtain a complete understanding of
how MNEs structure their operations, while also ensuring that the
confidentiality of such information is safeguarded.
v
The
OECD/G20 BEPS Project set out 15 key actions to reform the international tax
framework and ensure that profits are reported where economic activities are
carried out and value created.
v
BEPS
is of major significance for developing countries due to their heavy reliance
on corporate income tax, particularly from MNEs.
v
Country-by-country
reporting will require MNEs to provide aggregate information annually, in each
jurisdiction where they do business, relating to the global allocation of
income and taxes paid, together with other indicators of the location of
economic activity within the MNE group.
v
It
will also cover information about which entities do business in a particular
jurisdiction and the business activities each entity engages in.
Background
G20 leaders endorsed the
wide-ranging BEPS package in November 2015, marking an historic opportunity for
improving the effectiveness of the international tax system. The signed package
was a result of more than two years of discussions involving all OECD and G20
countries. The discussions also included more than a dozen developing
countries.
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