CFE’s Tax Top 5 – 19 February 2024



OECD Releases Pillar 1 Amount B Report

The OECD has released a report on Amount B of Pillar One, providing a simplified approach to apply the Arm’s Length Principle to baseline marketing and distribution activities. The report has been published in line with the Outcome Statement released in July 2023 concerning the further work needed to be completed prior to the Pillar 1 MLI entering into force.

Content from the report has been incorporated into the OECD Transfer Pricing Guidelines, providing the option of applying straightforward rules to baseline marketing and distribution activities to ensure tax revenue. The inclusion of the Amount B guidance into the OECD Transfer Pricing Guidelines is accompanied by conforming changes to the Commentary on Article 25 of the OECD Model Tax Convention.

According to the OECD, the approach “answers the call of low-capacity countries for what the African Tax Administration Forum (ATAF) has described as “vital” changes to the OECD Transfer Pricing Guidelines”. Amount B provides a “simplified and streamlined pricing framework that determines a return on sales for eligible distributors”. It is hoped the approach will reduce disputes, increase certainty and minimise compliance costs. The report introduces two implementation options concerning when a distributor is within scope of Amount B, and sets out which activities excludes a distributor from the scope of the approach.

The report is available here.

US, UK, Austria, France, Italy and Spain Extend Agreement on Transition from DSTs to Pillar One

Austria, France, Italy, Spain, the United Kingdom and the United States have issued a joint statement extending the agreement reached by the jurisdictions for a transitional approach to walking back the existing unilateral digital taxes in those countries. The countries first issued a Statement in October 2021 following the agreement reached by 136 jurisdictions on global minimum corporate tax and the partial reallocation of profit to market countries. The new statement sets out an extension of the compromise until the end of June 2024, in line with the updated timeline of the G20/OECD Inclusive Framework for adoption and signature of the Pillar 1 MLC.

In the initial statement, Austria, France, Italy, Spain, the US and the United Kingdom set out that they have agreed that the unilateral measures will remain in force until Pillar 1 is implemented, but that if the amount of tax collected in the jurisdictions exceeds the equivalent amount that would be due under Pillar 1 in the first full year of implementation, that the excess amount will be creditable against the portion of the corporate income tax liability associated with Amount A as computed under Pillar 1 in these countries, respectively. Further, the United States undertook to terminate any proposed trade action and refrain from taking any further action against Austria, France, Italy, Spain, and the United Kingdom in relation to their unilateral digital taxes until the implementation of Pillar 1 takes place.

The initial agreement noted that although the United States had argued for a immediate withdrawal of unilateral measures, effective as of the date of the political agreement, i.e. 8 October 2021, the countries with unilateral digital taxes preferred for the withdrawal of these measures to come into effect upon implementation of Pillar 1.

Save the Date: CFE Forum 2024 | Sharing the Tax Pie | 18 April 2024 | Brussels 

CFE Tax Advisers Europe will hold its 2024 Forum on 18 April 2024 in Brussels on the topic of “Sharing the Tax Pie: Revisiting the Role of the UN, EU & OECD in Tax Policy; and Taxable Presence Threshold (Fixed Establishment) in Indirect Taxation”.

CFE’s 2024 Forum will bring two excellent panels of speakers to discuss the allocation of tax base (Pillar 1 and the role of the UN, the EU and the OECD in international tax matters). Secondary taxation rights, in particular the subject to tax rule (STR) in the UN Model Tax Convention and OECD’s Pillars bring up issues of divergent aspirations in tax policy between jurisdictions.

Further details concerning the panels, speakers and registration is available here.

Next Meeting of the EU Parliament FISC : The Future of European & International Tax Policy

The next meeting of the FISC Subcommittee will take place on 19 March 2024, where an exchange of views will take place with the Commission, OECD and UN on the state of play and the future of European and international tax policy.

Last week, on 13 February 2024, from 15:00 to 17:15, a public hearing on the topic of “Tackling tax obstacles in the internal market and the role of tax policies in promoting economic growth” took place. A study commissioned by the FISC Subcommittee on “Good tax practices in the fight against tax avoidance – the signalling role of FDI data” was also presented after the hearing.

OECD Tax & Development Days – 12 & 13 March

The OECD is holding the 2024 edition of its Tax & Development Days on 12 and 13 March 2024, virtually via Zoom, to provide an update on the OECD’s tax capacity and policy initiatives in developing countries. Members of the OECD Inclusive Framework and key stakeholders are invited to participant, with sessions open to public.

Topics to be discussed across the two days include: developing countries perspectives on the Two-Pillar Solution; COVID-19 impact on revenues; taxation and inequality, transfer pricing and international taxation capacity; realities of carbon pricing; tax morale; tax transparency and co-operation; tax crime; Tax Inspectors Without Borders; VAT on e-commerce in developing countries, and more.

Further information and registration can be located here.

The selection of the remitted material has been prepared by:
Aleksandar Ivanovski & Brodie McIntosh