OECD’s BEPS action plan driving massive change to tax laws across Europe
Many European countries already making changes tax laws across Europe are undergoing massive reforms with one key component being the ongoing work of the Organisation for Economic Co-operation and Development (OECD) and their Base Erosion and Profit Shifting (BEPS) 15 Point Action Plan.
According to a new report from KPMG International, many European governments have expressed their commitment to address BEPS and many have already made changes to their tax codes in anticipation of current and future OECD recommendations.
Entitled The View in Europe, this KPMG International report examines the OECD’s BEPS 15 Point Action Plan and its current and expected impact on 10 European countries (Austria, Belgium, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Switzerland, and the UK).
Jane McCormick, head of tax and pensions at KPMG in the UK, said: “The reality is that most tax systems were set up a quarter of a century ago and international business has changed significantly since then. Countries need to consider how they will update their tax administrations to reflect life in the 21st century. Just this weekend, the UK government announced it will be the first of 44 countries to formally commit to implementing a new country by country reporting template unveiled recently by the OECD and further change is set to follow both here in the UK and around the world.”
So what will the European tax landscape look like in future? While specific answers are not yet possible, The View in Europe discusses a number of areas of particular interest such as:
Country-by-country reporting
Even companies that already take a cautious approach are performing impact evaluations to determine the skills and resources they will need to comply with country-by-country reporting. Country-by-country will require that results from several different jurisdictions be translated into a single standard.
Substance requirements
Current tax treaties, put in place to prevent double taxation, are now proving ineffective in preventing double non-taxation. It is expected that most countries will eliminate structures that permit companies to claim their profits in jurisdictions where they have no substance in terms of office space, tangible assets or employees.
Hybrid mismatches
There is widespread acceptance among European countries examined that tax planning based on hybrid mismatches will be curtailed. Switzerland and the United Kingdom have already moved to prevent companies from using hybrid structures for the sole purpose of gaining tax advantages.
Transfer pricing
Many countries in Europe have already indicated their intention to tighten transfer pricing rules in accordance with changes to the OECD guidelines.
Vinod Kalloe, head of international tax policy, KPMG Meijburg & Co. said: “The reactions we report on from country-to-country are enlightening. Some countries are forging ahead at full speed while others are taking a more cautious approach. With reputations at stake, ultimately for senior business leaders it will be a question of watching the developments and planning for a potential dialogue with all stakeholders on their tax matters.”
