Related Posts -- Prior Weeks' Tax News
COVID-19 News
Tax News for April 2020
Tax Topic: Many countries easing the tax residency rules due to the virus
Tax Story Summary:
- Several countries reassured multinationals that the travel bans will not change a company's tax system or create unexpected taxes.
- The inability to travel could could affect where companies are based for tax purposes.
- High-level executives are unable to perform necessary business functions in other countries.
- The travel ban issues could make multinationals vulnerable to tax residency or permanent establishment rules, resulting potentially in double residency tax issues.
- However, many countries eased the related tax residency rules.
- For example, the following countries promised to forgive the inability to meet residency requirements: Australia, United Kingdom, and Ireland.
- The best defense against the issue is to document the activities performed and the reason for doing said activities at the specific location.
Tax Topic: OECD continues on tax overhaul and the related digital tax reform
Tax Story Summary:
- The OECD aims to deliver a global tax overhaul by year end.
- The head tax official of the OECD stated that the goal remains year end despite COVID-19.
- Many business groups ask and hope for a pause to the global tax overhaul.
- The business groups cite the difficulty of virtual negotiation.
- The OECD must obtain agreements from nearly 140 countries.
- Several countries have already enacted new unilateral measures to tax digital companies, including France, Italy, and India.
- The OECD planned to reach a broad agreement at its meeting scheduled for July involving the negotiators from the countries involved in the tax overhaul.
- The OECD has yet to confirm if the meeting will take place.
Tax Topic: Transfer pricing in a pandemic
Tax Story Summary:
- Adviser believe that governments and taxing authorities will place greater emphasis on transfer pricing.
- The goal of the increased transfer pricing measures is to help alleviate the overall effect caused by the economic slowdown on a country's national budget
- The focus will be on multinationals and related transfer pricing agreements/transactions.
- Another issue involves the allocation of the virus-related costs.
- Should the U.S. parent absorb the loss or should the local subsidiaries adsorb the costs?
- Multinationals need to engage governments and taxing authorities to mitigate the risks associated with virus costs and the economic slowdown.
- It is important for the firms to set up an extensive virus-related tracking system.
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