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September 18, 2024 Global Tax Policy and Controversy Watch | September 2024 edition Key highlights UN advances Terms of Reference for a Framework Convention on International Tax Cooperation On 16 August 2024, the United Nations (UN) Ad Hoc Committee approved Terms of Reference for a UN Framework Convention on International Tax Cooperation. The Terms of Reference are set to be presented to the UN General Assembly for a vote during its 79th session, which opened on 10 September 2024. The draft provides for the Framework Convention to be negotiated during 2025—2027, after which it should be available for signature and ratification. OECD releases selection documentation package for MNEs participating in ICAP risk assessments On 1 August 2024, the Organisation for Economic Co-operation and Development (OECD) Forum on Tax Administration published on their website a list of documentation requirements for the selection stage of the International Compliance Assurance Program (ICAP). United Kingdom releases new guidelines for transfer pricing approaches On 10 September 2024, His Majesty's Revenue Customs (HRMC) published new Guidelines for Compliance that include best practices for common risks in transfer pricing approaches. The guidance is intended to reduce uncertainty for UK businesses by providing greater clarity and transparency with respect to HMRC's compliance expectations. News items BEPS 2.0 Pillar Two developments Bahrain issued domestic minimum top-up-tax legislation. Canada proposed an undertaxed profits rule (UTPR) and further amendments to its Global Minimum Tax Act. Switzerland announced the application of the Income Inclusion Rule (IIR) effective from 1 January 2025 and delayed indefinitely the application of the UTPR. Brazilian government proposes to increase combined CIT rate and withholding tax on INE payments If enacted, the bill would increase the withholding tax rate on interest on net equity payments (INE). It would also increase the social contribution on net profits rate, which is part of the combined corporate income tax (CIT) in Brazil. Brazil publishes public consultation on proposed transfer pricing regulations On 28 August 2024, the Brazilian Federal Revenue Service published a public consultation on proposed transfer pricing regulations applicable to intragroup services and advance pricing arrangements. The Canadian Department of Finance released several packages of draft legislative proposals for public comment on 12 August 2024, including the much-anticipated revised draft legislative proposals to implement changes to increase the capital gains inclusion rate. The Supreme Court of Kenya has granted conservatory orders staying the implementation of the Court of Appeal's judgment that declared the Finance Act, 2023 unconstitutional. The Supreme Court ruled that public interest tilted in favor of granting the conservatory orders. Taxpayers should therefore continue applying the provisions of the Act until the Court decides the consolidated appeal. Oman unveils Capital Market Incentives Program to boost economic growth The program outlines three pathways, each with tax reduction benefits, that are intended to bolster capital market participation from all market segments. Peru enacts regulations for 18% VAT on use of digital services by individuals On 4 August 2024, the Executive enacted Legislative Decree 1623, establishing an 18% VAT on individuals' use of digital services via online platforms and importation of intangibles via the internet. Beginning 1 October 2024, nonresident digital service providers and sellers will be required to withhold this 18% VAT. Taiwan announces proposal increasing AMT rate for certain MNEs from 12% to 15% The Ministry of Finance of Taiwan has proposed an increase, from 12% to 15%, to the alternative minimum tax (AMT) rate for multinational enterprises with annual consolidated revenue of more than €750m in Taiwan. The AMT regime is not equivalent to the Global Anti-Base Erosion (GloBE) rules and thus it should not be considered a qualified domestic minimum top-up tax for Pillar Two purposes. New proposed regulations modify the time period within which a foreign currency mark-to-market election can be made or revoked, likely preventing taxpayers from making or revoking a Prop. Treas. Reg. Section 1.988-7 election for the 2023 and 2024 tax years. The proposed regulations align the procedures for making Treas. Reg. Section 1.954-2(g) elections with other elections made on behalf of calendar year and fiscal year controlled foreign corporations.
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