EU and the OECD considering TRACE / withholding tax simplification

On 30 January 2018, the European Commission held a public session to discuss the code of conduct issued by the Commission in late 2017 regarding increasing the efficiency of withholding tax (“WHT”) procedures. The code of conduct contains a list of measures for E.U. Member States to consider in terms of simplifying WHT procedures as regarding cross border income such as dividends, interest, and royalties. The code is a non-binding document which allows for voluntary commitment by E.U. Member States.

The measures considered includes, inter alia, (1) increased digitalization of WHT procedures, (2) provisions of refunds in a short period, and (3) relief at source. The tax relief at source suggestion includes the use of “authorized information agents and withholding agents” to facilitate the verification of entitlement to treaty relief, provision of pooled withholding tax rate information, and reporting of relevant information.

Such a tax relief at source solution resembles the OECD’s Treaty Relief and Compliance Enhancement (“TRACE”) project which started in 2009. TRACE envisages the use of Authorised Intermediaries to facilitate a more efficient and simpler application of treaty relief on cross border investments in a similar manner to the U.S. Qualified Intermediary regime. Although TRACE has not been implemented in any country as of yet, we understand that it may be reactivated soon especially given the work done at European Commission level in terms of the WHT topic.

Please refer to the following link for access to the European Commission Code of Conduct.

Contact

Bruno Hollenstein
Partner, Operational Tax
+41 58 792 43 72
bruno.hollenstein@ch.pwc.com

OECD Publishes Public Comments on Mandatory Disclosure Model

On 18 January 2018, the Organisation for Economic Co-operation and Development (“OECD”) published the public comments on the discussion draft on Mandatory Disclosure Rules for Addressing OECD Common Reporting Standard (“CRS”) avoidance arrangements and offshore structures (“Discussion Draft”). The OECD had published the Discussion Draft on 11 December 2017, requesting comments from interested parties and stakeholders by 15 January 2018. The Discussion Draft outlined a proposed model requiring mandatory disclosure rules, which ultimately intends to target promoters and service providers with a material involvement in the design, marketing or implementation of CRS avoidance arrangements and opaque offshore structures.

The public comments on the Discussion Draft came from numerous sources, including all of the Big 4 firm networks. In terms of input from Swiss sources, the Swiss Banking Association, Swiss Association of Asset Managers, Association of Swiss Private Banks, and the Swiss Insurance Association all provided comments to the OECD. The general feedback highlights the potential practical difficulties in the application of the model, mainly due to retrospective application of rules and definitions that are too broad at present for practical application. As a next step, the OECD will take these comments into account and present a report on the topic to the G7 Finance Ministers in mid-2018.

Please refer to the link for access to the public comments on the OECD’s Discussion Draft.

Contact

Bruno Hollenstein
Partner, Operational Tax
+41 58 792 43 72
bruno.hollenstein@ch.pwc.com

Swiss CRS Updates – January 2018

During December 2017, the Swiss Federal Tax Administration (“Swiss FTA”) and the Swiss State Secretariat for International Financial Matters (“SIF”) provided important updates regarding the Automatic Exchange of Information on financial accounts (“AEOI”) under the OECD’s Common Reporting Standard (“CRS”). Upon the completion of ongoing parliamentary work, the SIF updated the list of jurisdictions and territories with which Switzerland has agreed to exchange information under the CRS. In addition to containing Switzerland’s AEOI partner jurisdictions, the list also includes additional information, such as the date of entry into force of the various CRS agreements as well as specific distinctions between the different partner jurisdictions. The updated list distinguishes between states that:

  • have not yet submitted their partner state notifications. The AEOI will thus be activated at a later date;
  • have declared themselves to be “permanent non-reciprocal jurisdictions”, i.e. they will supply account information to the partner states on a permanent basis but will not receive such data;
  • do not meet the requirements of the global AEOI standard at present and have postponed the introduction of the AEOI.

Please refer to the following links for the updated list of Switzerland’s AEOI partner jurisdictions in German / English.

In addition to the above-mentioned updates, the “Questions and Answers to CRS” on the Swiss FTA website and the OECD “FAQs” were also updated in December 2017.

Contact

Bruno Hollenstein
Partner, Operational Tax
+41 58 792 43 72
bruno.hollenstein@ch.pwc.com

CRS Updates – December 2017

OECD Seeking Public Comments Regarding Mandatory Disclosure Model

On 11 December 2017, the Organisation for Economic Co-operation and Development (“OECD”) published a press release containing a mandatory disclosure consultation document which is open for comments from interested parties and stakeholders until 15 January 2018. Through the consultation document, the OECD is seeking input for a model requiring mandatory disclosure rules, and which ultimately intends to target promoters and service providers with a material involvement in the design, marketing or implementation of Common Reporting Standard (“CRS”) avoidance arrangements and offshore structures.

While tax transparency has significantly improved over the past decade, issues remain in regards to the widespread use of offshore structures to circumvent CRS reporting requirements, as highlighted by the release of both the “Panama” and “Paradise” papers. With the OECD’s proposed model, the rules would require intermediaries to disclose information on potential schemes to their local tax authority. Said information would then be made available to other tax authorities in accordance with the applicable information exchange agreement.

The OECD is now seeking public input from interested parties and stakeholders via the consultation document. The deadline for comments is 15 January 2018.

Please refer to the link for access to the OECD’s press release and consultation document.

Swiss CRS Update: Additional Agreements Approved by Chambers of Parliament

On 6 December 2017, the Swiss Parliament announced their approval of 41 additional partner jurisdictions starting on 1 January 2018 for the Automatic Exchange of Information (“AEOI”) under the CRS. After an initial rejection from one chamber of parliament, Saudi Arabia and New Zealand were also approved and are part of the 41 new partner jurisdictions. In addition to this announcement, the Swiss Parliament outlined strict and detailed requirement criteria for existing and potential Swiss partner jurisdictions. As part of this, the Swiss Federal Council will evaluate whether Swiss partner jurisdictions are compliant with the OECD CRS before Switzerland will exchange any information or data with them. The results of said testing will be communicated to the chambers of parliament.

Please refer to the link for additional details regarding the Swiss Parliament and Federal Council’s AEOI-related decisions.

Additionally, please refer to the link for a list of Switzerland’s current AEOI partner jurisdictions.

Contact

Bruno Hollenstein
Partner, Operational Tax
+41 58 792 43 72
bruno.hollenstein@ch.pwc.com

Easily abused substance: How much substance does an entity need in order to be taxed in a particular country?

Setting up an entity through which an active business is conducted, or an interest other entities is held, is well understood and common. However, the world keeps on changing. As countries scramble to protect and enlarge their tax revenue base they are taking a fresh look at taxing entities, especially foreign ones. Much turns on the question of where an entity has its true substance.

The tax residence of an entity does not necessarily match the place where it is formally registered or incorporated. Some countries may claim that the entity is tax resident in their country if it is centrally managed and controlled from there. At issue is the highest level of decision making of the entity and not, for example, mere operational control. Factors to be considered include identifying the effective and economic centre of the entity’s existence and the place where the essential decisions of the entity are taken.

Read full attachment

Contact us

Andri Manatschal
Partner
+41 58 792 43 18
andri.manatschal@ch.pwc.com

Albrecht Herholdt
Senior Manager
+41 58 792 25 76
albrecht.herholdt@ch.pwc.com

EU – Register of beneficial owners

Under the 4th anti-money laundering directive of the European Union, all European countries are obliged to introduce legislation that will create a register of the ultimate beneficial owners (UBOs) of structures. Who qualifies as a UBO? What information will be collected? Who will have access to the data?

The 4th Anti-Money Laundering directive entered into force on 26 June 2017. Each member state should by now have transposed the directive into their national law. What follows is a discussion of the provisions of the directive itself at EU level.

To read more about the discussion, please click below.

Read Full Attachment

Contact Us

Marcel Widrig
Partner | Leader Private Wealth Services Switzerland
+41 58 792 44 50
marcel.widrig@ch.pwc.com

Albrecht Herholdt
Senior Manager | Tax & Legal Services: International Private Wealth & Entrepreneurs
+41 79 278 72 38
albrecht.herholdt@ch.pwc.com

OECD BEPS: Multilateral Instrument signed by Switzerland and 67 other countries

On 7 June 2017, officials from more than 70 countries participated in the signing of the multilateral instrument (“MLI”), which is a result of negotiations of more than 100 jurisdictions. The Organization for Economic Cooperation and Development (“OECD”) aims for a swift implementation of a series of tax treaty measures to update international tax rules and reduce the opportunity for tax avoidance. Impacts for Swiss companies are mainly expected in the field of dispute resolutions.

The MLI is one of the outcomes of the OECD/G20 Project to tackle Base Erosion and Profit Shifting (“BEPS”) and has the goal to enable countries to swiftly modify bilateral tax treaties (more than 3’000 worldwide) to include the measures developed in the course of the BEPS work. In this respect, an ad hoc group, consisting of 99 countries, four non-state jurisdictions and seven international or regional organizations participating as observers, developed the MLI. In their negotiations, the ad hoc group focused on the following BEPS measures and how the MLI would need to modify the provisions of bilateral or regional tax agreements. Aiming to swiftly implement those measures, some of which are minimum standards and others representing best practice recommendations only:

  • Hybrid mismatch arrangements in accordance with BEPS Action 2 (best practice recommendation);
  • Granting of treaty benefits in inappropriate circumstances under BEPS Action 6 (minimum standard);
  • Amendments to the definition of “permanent establishment” as recommended under BEPS Action 7 (best practice recommendation);
  • Facilitating of access to and resolution of mutual agreement procedures consistent with BEPS Action 14 (minimum standard).

Continue to read in detail in our current newsletter.

If you have questions, please contact your usual PwC contact person or one of PwC Switzerland´s experts named below.

Contacts

Andreas Staubli
Partner
Leader TLS Schweiz
Tel. +41 58 792 44 72
Send E-mail
Armin Marti
Partner
Leader CT Schweiz
Tel. +41 58 792 43 43
Send E-mail
Stefan Schmid
Partner
Tax & Legal
+41 58 792 44 82
Send E-mail
Fabio Dell’Anna
Partner
Tax & Legal
+41 58 792 97 17
Send E-mail
Claude-Alain Barke
Partner
Tax & Legal
+41 58 792 83 17
Send E-mail
Michael Ruckstuhl
Senior Manager
Tax & Legal
+41 58 792 14 94
Send E-mail

EMEA ITS Permanent Establishment Webcast Series, Episode One

The Changing PE Threshold

Thursday, 8 June 2017, 3.00 – 3.45 pm CET

Preventing the artificial avoidance of Permanent Establishment (“PE”) status is one of the key topics addressed by the OECD’s Base Erosion and Profit Shifting (“BEPS”) package.

In this webcast series PwC specialists will address the practical implications that a reduction in the PE threshold will have for multinational corporations and will provide an insight, through examples, on the challenges and practical actions that can be taken to manage PE in the post-BEPS world.

The webcast series will provide a mix of technical updates and analysis, practical experience and local country expertise around topics such as profit attribution to a PE, direct tax consequences of a PE and the broader impact that the new rules will have on an increasingly global and mobile workforce. Critically, it will give you the chance to raise questions directly to our PE specialists.

The webcast series will start by setting the scene for the current PE landscape by considering the practical changes that have taken place to the PE threshold and the subsequently looking at the practical challenges associated with attributing profit to PE’s. The later sessions will focus on the practical implications of
these changes, providing guidance and experience of the challenges and risks that may be created.

  • Session 1 –The Changing PE Threshold – 8 June 2017
  • Session 2 –Profit Attribution to PE’s – 6 July 2017

After the summer break we will return recharged with further sessions covering topics such as

  • Broader implications of a PE beyond corporate tax
  • VAT and PE
  • Employee mobility and PE consequences

Episode 1, The Changing PE Threshold – 8 June 2017

This introductory episode will set the stage for our ongoing discussion of PE in the new tax environment and will work through practical examples being faced by multinational corporations, addressing questions such as:

  • What are the main developments in the definition of PE in the international environment?
  • Walk though practical examples to demonstrate how the changes related to: (1) fixed place of business, (2) auxiliary and preparatory exceptions, (3) independent and dependent agent, (4) antifragmentation and contract splitting are likely to work in practice and potential risk areas.
  • Assess how PE definition and interpretation may vary by local jurisdiction, taking Poland and Spain as examples to identify the impact this will have on a multinational’s approach to international business.
  • Provide an update on the multilateral instrument as it relates to PE.

Speakers for episode 1 are:

Monica Cohen-Dumani – EMEA ITS Leader
Guillaume Glon – PwC France
Mike Cooper – PwC UK
Agata Oktawiec – PwC Poland
Carlos Concha Carballido – PwC Spain
Please click on the below link to register for the WebEx session.

Registration Link

Complete the required registration fields and select “Submit”.
Once you have registered, you will receive the WebEx access details. The WebEx will be recorded and you will receive a link to the recording via e-mail after the event using the same details. There will be time for questions and answers with your speakers during the WebEx. Questions can also be sent in advance of the
WebEx session to the following email address: grasiele.neves@ch.pwc.com

We do hope that you will join us online!

Best regards
Monica Cohen-Dumani

PwC | Partner, International tax services, EMEA ITS Leader
Office: +41 58 792 9718 | Mobile: +41 79 652 14 77
Email: monica.cohen.dumani@ch.pwc.com
PricewaterhouseCoopers SA
Avenue Giuseppe-Motta 50 | Case postale | CH-1211 Genève 2, Switzerland
http://www.pwc.ch

BEPS update: Changes and reactions following the BEPS final reports’ release

As we enter the second phase of the OECD-led BEPS project, which covers clarifications (and work left to complete), implementation and monitoring, we reflect on the changes and tax authority reactions following the 5 October 2015 release of the BEPS final reports. Governments and tax authorities have been very active, from both a behavioural and a legislative basis. This includes tax authorities in such countries as the United Kingdom, Australia, China and the United States, among others. Undoubtedly, the BEPS project has already had, and will continue to have, a profound impact for most taxpayers.

As part of extending the reach of the BEPS project, a ‘framework’ is to be agreed early in 2016 with involvement — on an equal footing — of interested countries and jurisdictions other than OECD members and G20 members. This will include input from supranational organisations like the UN, IMF and World Bank Group. The OECD and relevant working groups are currently addressing this action, along with other actions that were identified in the BEPS final reports presentation. We consider the framework and also look ahead to what likely will happen throughout 2016 and beyond. Finally, on an individual action-by-action basis, we add insights regarding the various stakeholders’ intentions and commitments.

Read more.

Time is of essence
Since notwithstanding the overall timeframe, implementation is in process (and well advanced in some areas) and tax authorities are already taking a more aggressive stance, your business should consider how the BEPS project will impact your entity and which concrete action should be taken now.

Write an e-mail to Benjamin Koch
CLICK HERE

New Luxembourg income tax law and its consequences for Swiss companies

This newsletter addresses the few points we would like to highlight with respect to the new corporate tax measures of the Luxembourg income tax law (“LITL”) enacted in Luxembourg for years 2015 and 2016. For a complete overview of the amendments, please refer to PwC Luxembourg newsletter.

We will focus on two specific measures, which are especially relevant for companies having a presence in Luxembourg:

  1. the new Luxembourg domestic participation exemption regime (art. 147 and 166 LITL), and
  2. the transitional rules in relation to the abolishment of the Luxembourg IP regime (art. 50bis LITL)

Read our newsletter to know more about the consequences for Swiss companies and our recommendations for the future.

For further questions, you may contact Michael Frigo from PwC Luxembourg and Daniel Gremaud from PwC Switzerland.

Michael Frigo
PwC | Partner
Office: +352 49 48 48 3332
Email: m.frigo@lu.pwc.com
PricewaterhouseCoopers, Société coopérative
2, rue Gerhard Mercator B.P. 1443 L-1014 Luxembourg
www.pwc.lu
Daniel Gremaud
PwC | Partner, Leader Tax & Legal Romandie
Office: +41 58 792 81 23
E-mail: daniel.gremaud@ch.pwc.com
PricewaterhouseCoopers AG
Birchstrasse 160 | P.O. Box | CH-8050 Zurich
www.pwc.ch