The top 10 significant changes in global tax regulations this year are:
1. BEPS 2.0: The ongoing OECD-led Base Erosion and Profit Shifting (BEPS) initiative has seen significant progress in 2021, with new proposals aimed at addressing tax challenges arising from the digital economy and multinational enterprises.
2. Digital Services Taxes (DST): Several countries have introduced or proposed DSTs on digital service providers, targeting large tech companies that operate globally. This has raised concerns about potential double taxation and trade disputes.
3. Global minimum tax: The G7 agreement in June 2021 on a global minimum corporate tax rate of at least 15% is a significant development in international tax rules. If implemented, it will impact multinational companies’ tax planning strategies and aim to eliminate profit shifting to low-tax jurisdictions.
4. Pillar One and Pillar Two: As part of the BEPS 2.0 initiative, the OECD is working on two pillars of reform. Pillar One focuses on reallocating taxing rights to market jurisdictions, especially for highly digitalized businesses. Pillar Two aims to establish a global minimum tax and introduce rules to ensure fair taxation.
5. EU’s Digital Levy: The European Commission proposed the Digital Levy, which seeks to tax large tech companies’ digital activities in the EU, irrespective of their physical presence. The proposal is intended to bridge the gap until an international agreement on digital taxation is reached.
6. Transfer Pricing: Many tax authorities are closely scrutinizing transfer pricing practices to ensure appropriate profit allocation between related entities. Increased documentation requirements and transparency measures have been introduced to address base erosion and profit shifting.
7. COVID-19 Related Measures: Governments have implemented various tax measures in response to the pandemic, such as financial support programs, tax relief, and deferral measures to ease the economic burden on businesses and individuals affected by the crisis.
8. General Anti-Avoidance Rules (GAAR): Several countries have strengthened their GAARs to prevent aggressive tax planning. GAARs empower tax authorities to deny tax benefits arising from transactions with artificial or abusive arrangements.
9. Country-by-Country Reporting (CbCR): The implementation of CbCR rules continues to expand globally, requiring multinational companies to disclose detailed information on their operations, profits, and taxes paid in each jurisdiction they operate.
10. Increased Tax Enforcement and Cooperation: Tax authorities are collaborating more extensively through information exchange and increased tax enforcement efforts to combat tax evasion, base erosion, and profit shifting.
It is important to note that tax regulations can vary based on jurisdiction, and this list provides a general overview of significant global developments. Local regulations and specific country updates should be considered for accurate and up-to-date information.