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While much of the focus has remained on the efforts of the Organisation for Economic Cooperation and Development (OECD) with respect to digital taxation, the United Nations (UN) has finalized revisions to the UN Model Double Taxation Convention (UN Tax Treaty) that would specifically address the taxation of “automated digital services.” On April 20, 2021, the UN approved the final version of new Article 12B of the UN Tax Treaty, Income from Automated Digital Services. Generally, the approach taken by Article 12B is to permit a withholding tax on gross payments for “automated digital services” made by a resident of one treaty country to a resident of the other treaty country. In order to eliminate the withholding, the recipient can declare a permanent establishment in the payor jurisdiction and instead be subject to tax on its net income from automated digital services. This approach represents a departure from tr
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Overview. As discussed in prior blog posts,
Amount A is a proposed new taxing right over a share of residual
profit of MNE groups that fall within its defined scope. The
calculation and allocation of Amount A will be determined through a
formula that is not based on the Arm s Length Principle (ALP).
The formula will apply to the tax base of a group (or segment where
relevant) and will involve three components: Step 1: a
profitability threshold to isolate the residual profit potentially
subject to reallocation; Step 2: a reallocation percentage to
To print this article, all you need is to be registered or login on Mondaq.com.
As discussed in prior blog posts, Amount A is a proposed new
taxing right over a share of the residual profit of MNE groups that
fall within its defined scope. The tax base is therefore determined
on the basis of the profits of a group (rather than on a separate
entity basis), and it is necessary to start with consolidated group
financial accounts.
Comment: As discussed in prior blog posts, the reliance
on consolidated financial statements in computing Amount A is a
novel concept. Many taxing authorities are likely to view reliance
GENEVA, Feb 16 2021 (IPS) - The United Nations Committee of Experts on International Cooperation in Tax Matters (UN Tax Committee) is an important and influential subsidiary body of the Economic and Social Council (ECOSOC) that shapes standards and guidelines on international taxation. These are the rules through which Multinational Enterprises (MNEs) are taxed.
Its role post-COVID has become even more important as countries struggle to raise revenue. Despite being under-resourced, it has produced valuable guidance, especially on the crucial question of the digital economy. As a new Membership of the Committee is about to be selected, this brief provides practical recommendations on how the Committee can be reformed to be made more effective, especially for the interests of developing countries.