Work on the Base Erosion and Profit Shifting project continues to move forward. The BEPS Inclusive Framework met in Peru on 27-28 June, with representatives from over 80 countries.
The Inclusive Framework now includes 116 countries and jurisdictions, with others expected to join. The EU’s Non-cooperative jurisdictions measures have certainly acted as an encouragement, since a requirement to stay off that list is adoption of the four BEPS minimum standards.
More countries have signed the BEPS Multilateral Convention, bringing the participants to 82. Peru, together with Kazakhstan and the UAE, naturally signed during the framework meeting. The last remaining EU state, Estonia, has also signed. Nine countries have now ratified the Convention, including the UK. The key start date for these countries, and others which ratify by 30 September, will be 1 January 2019 when the anti-treaty abuse rules kick in, which will stop some funds and holding companies within multinational groups from claiming reduced withholding taxes on interest, royalties and dividends. The vastly-improved dispute resolution provisions will take effect from the start of the 2019 tax year (1 April for the UK and 1 January in most other countries). A smaller number of countries will see changes to the definition of taxable presence for companies, since there is less agreement on how best to change those rules. The Working Party on Tax Treaties is working on additional guidance on when taxpayers may claim the benefit of treaties, to improve global consistency in defining treaty abuse.
The OECD secretariat released on 21 June final transfer pricing guidance on of the profit-split method and the application of principles to hard-to-value intangibles. Still to come is the controversial first draft of new guidance on financial transactions.
Update: the draft guidance on financial transactions was released on 3 July for comment.