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The Conundrum of the Two-Pillar Solution

21 Jun 2022
Non classifié(e)

The Organization for Economic Co-operation and Development (OECD) Pillar 2 Rules reached a ground-breaking international accord, with over 130 countries that agreed to impose a minimum 15% corporate tax on multinational enterprises (MNEs) with a global turnover of €750 million or more.


The proposed global minimum tax will be implemented as a “top-up” tax to increase the tax burden of MNEs to at least 15% in countries where the MNEs’ tax burden, on a country-by-country basis, is lower than 15%.


Questions have been raised whether the accounting rules in the consolidated financial statements used in Pillar 2 can be reconciled with local generally accepted accounting principles without incurring considerable extra cost and risk. A particular focus is the risk of double taxation when applying the Pillar 2 rules alongside existing regulations.


The OECD’s model rules on Pillar 2 bring together two interlocking measures:
Firstly, the income inclusion rule (IIR): A top-up tax on the ultimate parent entity of a low-taxed foreign subsidiary; and secondly the undertaxed payment rule (UTPR): The UTPR requires a UTPR taxpayer that is a member of an MNE Group to make an adjustment in respect of any top-up tax that is allocated to that taxpayer from a low-tax Constituent Entity of the same group.


The OECD Model Rules suggest the following for the geographical attribution of additional tax revenue.
Firstly, a Qualified Domestic Minimum Top-up Tax (QDMTT) can be levied in an under -taxed country where a subsidiary of MNE is located. Secondly, the domicilium country where ultimate parent company is located, can apply a global minimum tax of 15% through the IIR, and lastly in exceptional circumstances where the global minimum tax is not charged under the IIR, other high-tax countries where the members of MNEs are located, can apply the UTPR.


Very few countries are on track to legislate or implement Pillar 2— similarly with Pillar 1, which aims at reallocating taxing rights to reflect an increasingly digitized global economy. There is a serious risk of tax disputes and double-taxation due to the differences in interpretation, application, and legislative enactments which raises the question if it is feasible to set the date for implementation for 2023. While there may be a temptation to leave preparations until everything is set in stone, this would leave your business with dangerously little time to get ready for what is a major overhaul ahead.


Sources:


https://www.grantthornton.global/en/insights/articles/global-developments-in-international-tax–pillar-2-model-rules/

https://www.tkfd.or.jp/en/research/detail.php?id=884

 

XBRL 101 Webinar: What is XBRL?

18 Jan 2022
Non classifié(e)
global connect consultancy    

Your ESEF reporting begins and ends with XBRL. What is XBRL? Why is XBRL reporting beneficial for your financial reporting? And what are the main challenges companies currently face?

Register Now
  • The XBRL open standard will continue to play a significant role in financial reporting. While XBRL is not new, the standard is now mandatory for EU listed companies. This development is meant to increase the level of transparency, compliance and communication between businesses. However, does implementing XBRL automatically promise succes, or is there still a lot of work to be done?

 

Global Connect Admin and Global Connect Consultancy wholeheartedly invite you to the XBRL 101 webinar: How to effectively start your XBRL Journey. The webinar will begin on 26 January from 13:00 to 13:30 CET. 

 

In about 20 minutes we will explain the basics of XBRL, namely:

• What is XBRL
• What are the advantages of XBRL and XBRL software
• What are the main challenges companies currently face when dealing with XBRL
• How can Global Connect Consultancy and Amelkis XBRL assist your company’s XBRL journey

 

We hope to see you there. Please click the following link to read more about the webinar and get your free ticket. 

 

Register Now

Related articles

  • Working with ESEF: The European Single Electronic Format
  • Why XBRL could be more essential than expected

 

sortir bientôt…

03 Sep 2021
Non classifié(e)

Chez Global Connect Admin, nous sommes occupés à préparer nouveau contenu et un nouveau Site Web d’entreprise !

Restez à l’écoute pour en savoir plus, car nous commencerons bientôt la mise à jour !

Brexit: Some pointers for you and your company

05 Jan 2021
Brexit, Current news, Europe, Non classifié(e), United Kingdom
Brexit, customs, Europe, import and export, trade, United Kingdom

There seems to be no escape: Brexit. Before the news came out that there finally was a deal, December was a month full of nervous waiting. The advice from the Customs, Chamber of Commerce, Tax Authorities, MLNV, the Embassy, and the Task Force VK all sounded the same: Whether there is a deal or no-deal, preparations are necessary! The deal situation has a few advantages (compared to a no-deal), such as facilitating documents of preferential origin and import duties, but this does not mean there is less work to be done.

We have listed a few pointers for you and your company.

1. Prepare your documents

Prepare for custom formalities, supervision of goods traffic, levying of customs duties and excise duties, and the non-tariff trade barriers. Most companies trading with the UK are familiar with these topics. We have listed some necessary documents for you, with a brief explanation.

1.1 Export from the EU to the UK? Take care of the export invoice (excluding VAT), transport documents and export declaration

This situation has a few adjustments. You can no longer make an intra-community delivery when providing the export invoice, which means an export declaration is required. An EORI number is necessary for this export declaration. You must ensure a correctly completed export declaration for the transport documents (CMR, B/L, or AWB) and proof of export. This declaration allows you to claim exemption from VAT with the tax authorities, depending on your Incoterm. Make sure to have your documents ready and stored because the customs can check your documents for up to 7 years.

When importing into the EU from the UK, it goes the other way around: the British supplier provides the export invoice and a British export declaration as proof of the VAT. He also includes transport documents, UK export declaration and, depending on where the goods enter the EU, the transit documents (T1). In the EU, you need an import declaration (AGS or EORI number), payment of import duty, consumption tax and VAT. With your requested VAT code number, according to Article 23 of the Turnover Act, you can reverse charge the VAT. This step is especially crucial for the person who takes care of the logistics for you.

1.2 Pay attention to the UK import declaration

You have to communicate an agreement about the import declaration with the customer. To apply for an EORI number, visit your designated tax authority’s website (e.g., if you own a Dutch company, you have to go to the Dutch tax authorities). For a British EORI number, you must go to the British Government website.

1.3 Bringing goods to the UK from the EU through roll on roll off ports?

The British Government has made an overview of preparations for using roll on roll off ports and ferry services. You can view this on their website.

1.4 Arrange the UKCA marking

(Web)shops have to deal with new rules, such as distinguishing between packages worth more or less than 135£. UKCA marking replaces CE marking. The safety requirements remain largely the same, but the UK standard is needed to get your products to the UK market. Some CE markings can still be used in the UK market until 1/1/2022. However, this does not apply to every marking. Therefore, check the UK Government website on how to arrange the UKCA marking.

 

2. Make sure everyone knows what to do

In matters such as VAT reverse charge, Incoterm costs, import and export declarations, and transport documents, you must continuously communicate with other parties (such as customers and suppliers). The necessary information can be obtained here:

2.1 Check the Brexit Checker

The UK Government has all the essential information. If you do not know what to look out for, you can do the Brexit Checker. We recommend this, even if you have done this scan before, as it updates frequently.

2.2 Check the consequences for public administrations and EU businesses

Do you have questions and uncertainties about excise duties, intellectual property law, and prohibitions and restrictions? The European Commission listed the EU guidelines so that you can keep an eye on these matters.

2.3 Check the UK Government

Changes in, for example, VAT payments can be found on the website of the UK Government. In general, the website provides essential information on the Brexit situation.

 

3. Select the best Incoterm

As you can see above, there are many Incoterms to choose from, so pick one that suits you best. Who will bear which costs (import duties, customs clearance costs) and transport risk depend on the agreed Incoterm. Pay attention to long-term contracts, EXW and DDP risk factors, risk during loading and unloading, and transport risk. For example, with the FCA Incoterm, the buyer is primarily responsible for the arrival of goods, whereas the DDP Incoterm, the seller is primarily responsible. You have to consider which party should be accountable and where the risk transfer points lie for you. Discuss this with your customer and suppliers.

If you are not sure which Incoterm suits you best, and how to arrange this, go to the UK Government website.

 

4. Check, check, and check again!

Djoeke Adimi, of the Task Force VK, describes the situation as ‘significantly complex.’ « If you want to trade or continue to trade with the UK, you have to do your homework. » You need to sit down and work for a while, and by this we mean: you have to check everything carefully, down to the details. The complexity depends on which actions you want to perform.

 

Feel free to talk to us, or visit brexitloket.nl or gov.uk for further details on Brexit matters. Do not be afraid to work together and ask for assistance: Although you need to have your paperwork in order, you certainly do not have to do this alone.

 

Bronnen:

Brexit Loket (Dutch Government) – Dutch Chamber of Commerce – Dutch Tax Authorities – Dutch Customs – UK Government

Illustrations by Global Connect Admin B.V.

Holiday Wishes

24 Dec 2020
Non classifié(e)
Holidays

We at Global Connect Admin B.V. wish you a merry Christmas and a Happy healthy new year!

This year has been difficult for everyone. We hope that 2021 brings new opportunities for you and your business. Let’s stay connected! For now, we hope everyone stays safe and healthy during the holidays.

Kind regards,

Your Global Connect Admin Team

Coronavirus Countermeasures on Tax Matters Recommended by OECD

07 Apr 2020
Non classifié(e)

In recent months, a virus COVID-19 has broken out in many countries on the globe, which caused huge losses to countries and enterprises. As many firms declared difficulties in their cash flows, some upcoming tax burdens also become an issue in need of a provisional solution allowing firms to survive this unprecedented period. The OECD has quickly published a set of guidance to tax authorities last month to help with establishing provisional measures countering negative impacts brought by the COVID-19. This guidance is meant to assist countries dealing with this sudden outbreak, providing supports to the public, increasing liquidity of firms and thus maintaining productivity of each economy as much as possible.

Claire Mueller on Unsplash

The guidance can be summarised into the following key recommendations:

  1.  Authorities should provide temporary relief or subsidies to individuals and labourers domestically, including groups which are not eligible to receive such benefits in normal conditions due to the special circumstance of COVID-19.
  2.  Provide exemptions or deferrals of taxation on social securities and income tax on enterprises and sole proprietorships.
  3. Provide tax benefits to medical personnel and staff working closely with virus preventions, for instance, exempting partial income tax and social security contributions.
  4.  Apply deferral schedules on levying import VAT, customs duty, consumption tax and the like while safeguarding and enhancing the management of such schedules to avoid any abuse.
  5.  Expedite tax returns on VAT, target on prevention of tax fraud, and simplify procedures on application for VAT exemptions on bad debt.
  6.  Adjust expected tax estimates on taxpayers to reflect taxpayer obligations more accurately and adjust the prepayment of such taxes accordingly.
  7.  Grant deferrals or exemptions to taxes of which the tax bases are not changing according to economic cycles.
  8. Enact generous rules on carry-over losses.
  9. Allow employers to pay workers with partial employment subsidies or other substitutive incomes to ease the pressure of staff trimming.
  10. Countries should stay prepared for post-pandemic economic recovery, in particular maintaining a balance between fiscal incentives and stabilizing measures.

OECD further pointed out that the focus of taxation management policy has shifted to implementing more traditional tax incentives, the purpose is to restore market faith and encourage economic activities. The current economic hibernation could effectually help everyone and every country to survive such a down-turn caused by the outbreak of COVID-19. Recovery in economy can be expected but it could take some time. In post-pandemic recovery, a balance between incentives and stability is actively sought with discretion in each country. If you would like to know more about OECD obligations on enterprises or wish to see some relief benefits on your company, talk to us!

 

Global Connect Admin B.V. | Xuan Hao

Transfer Pricing Guidance on Financial Transactions by OECD

05 Mar 2020
Non classifié(e)

 

On 11th February, OECD has published a new guidance on transferring pricing, the Transfer Pricing Guidance on Financial Transactions, which was a new development under the BEPS Action Plans, specifically under Actions 4 and 8-10. It signifies the first attempt to update the existing OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations for further specification of transfer pricing in financial transactions to improving efficiency and consistency of applying transfer pricing principles and preventing both disputes and double taxation.

Alvaro Reyes on Unsplash

Transfer Pricing refers to the behaviours typically found in intra-group trade within multinational enterprises (MNEs) to allocate costs and profits to more favourable tax jurisdictions for tax avoidance purposes. Transfer Pricing Principle is better known by the term arm’s length principle, which refers to a rule that the price of the goods or services traded within one MNE between different entities located in different tax jurisdictions should be determined as if they are independently functioning companies in the market. If prices can be freely decided between group subsidiaries or affiliated companies, market distortion or monopoly can be easily achieved by MNEs or such groups holding dominant market shares by means of profit shifting and tax evasion.

Here is a simplified overview of new contents in this new guidance. Actions 4 and 8-10 of BEPS Action Plans talk about interest deduction limitations, intangibles, risks & capital, and high-risk transaction respectively. Transfer Pricing Guidance on Financial Transactions being part of the Inclusive Framework on BEPS regarding these Actions has provided for more clarity in section B on the application of the accurate delineation analysis to capital structure of an MNE within an MNE group. Meanwhile it is also made clear that this section does not prevent countries from implementing domestic measures to address capital structure and interest deductibility. Other clarifications include outlining economically relevant characteristics for analysing terms and conditions of financial transactions, such as contractual clauses, functionality analysis, characteristics of financial instrument, economic environment and operational strategies. Sections C-E has addressed specific issues in relation to the pricing of financial transactions, include but not limited to treasury functions, intra-group loans, cash pooling, hedging, guarantees and captive insurance, which are highly elaborative on both the accurate delineation and the pricing of the controlled financial transactions. Section F, as the last part of the main body, provides for determinations of a risk-free rate of return and a risk-adjusted rate of return. This guidance is annexed into the OECD Transfer Pricing Guidelines as Chapter X in entirety with adjusted numbering.

For many, OECD rules and BEPS updates are of high relevance due to boosting trade between MNE groups and affiliated companies. Stay on top of news and seek professional assistance are always helpful to avoid the avoidable and keep your business as stable as possible. We are always here to hear your needs.

 

Global Connect Admin B.V. | Xuan Hao

Practical Actions That Will Improve Cultural Intelligence

26 Feb 2020
Non classifié(e)

In mid-February, GCA joined a cultural intelligence workshop event organized by DUJAT for Dutch- and Japanese-oriented organizations and international expats. It was a great pleasure to be part of the speakers’ team facilitating the whole session altogether. While many participants considered the workshop to be very helpful and practical in different ways, there are some take-aways that the majority agreed on.

Ben White on Unsplash

Cultural intelligence is an ability that would enable one to understand the other in a cultural context foreign to the former. It consists of motivation, knowledge and actions. To improve this ability, an organization should bring this topic across; a team should come up with practical action plans to encourage communication and inclusiveness among local and foreign members; each individual should remain curious and respectful to unknown behaviours and try informal contacts or activities to understand the other side better. To be more specific, some tangible plans discussed during the workshop were thought to be helpful by many. We would like to share with you some take-aways in relation to the three key aspects of cultural intelligence: motivation, knowledge and actions.

  1. Compose brochures containing cultural intelligence knowledge and information about both cultures to invite interests and curiosity, which can build up motivation and knowledge in learning about the other culture.
  2. Initiate prior communication on what and how to proceed before real interactions take place between two cultures, which helps with both knowledge and actions.
  3. Improve process management regarding behaviours, communication channels, decision-making procedures, information disclosure, and feedback control, which also helps with knowledge and actions.
  4. Select a cultural ombudsman who has understandings of both cultures and behaviours to interpret messages and contexts to one another, which could help with both motivation and knowledge, or sometimes actions.
  5. Field trip and visits to each other in person and on site, which gives people, especially the management, a real sense of the other culture and behaviours attached to it. This action could increase the motivation to understand and the knowledge to make better decisions.
  6. Participate in trainings and workshops, which could offer a good opportunity to involve as many as possible at once. This action helps people seriously and openly discuss things confuse or bother them and generate a better understanding, which helps with knowledge and actions, or possibly motivations if someone is new to cultural differences.

Cultural intelligence is very intangible, but to make it more tangible so that plans are implemented through actions to take real effects, professional trainings are very useful to learn more or to improve more. GCA is constantly learning, improving, and sharing, despite of our experiences in dealing with cultural differences from many clients. If you are an international business, we are here to understand you and bring your business further by providing reliable financial services with an inclusive and respectful attitude.

 

Global Connect Admin B.V. | Xuan Hao

 

 

Speaking of Cultural Intelligence

08 Feb 2020
Non classifié(e)

Cultural Intelligence, or Cultural Quotient (CQ) is an ability of an outsider to interpret another culture, another behaviour, another rationality and irrationality. We would like to bring this topic to you because crossing border has certainly become a routine in most businesses and sectors, also because this soft factor is not easy to grasp at once but is playing an important role in becoming a successful business.

This concept was initially developed by Professor Christopher Earley and Soon Ang in their book Cultural Intelligence in 2003. It was defined as the ability to adapt to new cultural settings. It is the ability to understand unfamiliar or ambiguous behaviours and recognize shared influences but yet not to make assumptions or generalizations based on any single aspect. Because people coming from the same country or the same cultural group could behave differently due to their positions in a business, their situations, their age or gender, their education and backgrounds, and sometimes their personalities.

mnm.all on Unsplash

How tell if an employee has CQ or how to develop CQ when lacking? It is essential to look at the three components of CQ first. The Harvard Business Review identified Head – cognitive, Body – behavioural, and Heart – motivational as the key components of CQ. In simple terms, a person should understand a foreign culture, adapt the right physical behaviours, and take actions accordingly for a success in result.

Take an example of the Dutch and the German. If one would run a quick comparison on the Hofstede Insights on these two countries on the six cultural dimensions, in which Germany is considered more masculine and the Netherlands more feminine. This suggests that the German prioritize career development and high achievements over private life, and the Dutch in the contrary. However, this is only a generalized conclusion. Approach to a cultural group individually, it is also not surprising to see not everyone from that culture follows the same mindset and behaviours. This could vary between subgroups or communities, sometimes in corporations or families. Making appropriate research and observation or gathering the right information and knowledge is usually the first step. Because general ideas do not help as much as expected on an individual basis. Upon necessary knowledge, thinking towards understanding is the next step. From understanding to strategies and then to actions are the last two steps to complete the CQ management.

On 12th February, we will be speaking more about this topic in Amsterdam with three other speakers under the organization of the Dutch Japanese Trade Federation. Please join us for more discussions in the event or stay tuned for our next article summarizing the discussion and findings in that event.

 

Global Connect Admin B.V. | Xuan Hao

 

 

More Global Transparency on Assets and Less Tax Havens on the List

27 Jan 2020
Non classifié(e)

According to recent information from Reuters, the EU has agreed to remove UAE, Switzerland and the Marshall Islands from the tax haven blacklist in October 2019, which signified another step forward on the journey to global transparency on assets. In the following month, Hong Kong has taken actions and has shut down a large number of offshore accounts. Large-scale tax avoidance has becoming more and more restricted and riskier as the Common Reporting Standards (CRS) are being widely implemented and the trend on global information transparency is growing.

Kelly Sikkema on Unsplash

The EU tax haven list can be viewed in two lines, the blacklist and the grey list. The blacklist was initiated in 2017 and 25 countries has been removed from that list so far. The grey list consists of another 34 countries or regions. They are on grey list because they have agreed at the end of 2019 to commit to improve tax compliance in upcoming years. If their commitments are fulfilled soon, they will be removed from the grey list; Otherwise they will be replaced into the blacklist.

 

 

 

The EU issues these two lists based on three main criteria:

  1. Transparency
  2. Fair Tax Competition
  3. BEPS Implementation

The remaining tax havens which have not committed to improving tax compliance or information exchange mechanism are American Samoa, Guam, Fiji, Samoa, Trinidad and Tobago, US Virgin Islands, Vanuatu and Oman.

Global assets transparency is a result of automatic exchange of financial information based on CSR, which might bring more tax burdens or even fines, if failure to report timely, onto taxpayers possessing various assets in different countries or regions. Passive non-financial companies (aka shell companies) established in favourable tax jurisdictions for assets management or tax avoidance could face more information disclosure to the authorities, which lead to an inhibiting effect on tax avoidance behaviours. Family trusts, large insurances, trade businesses and so forth are all belonging to the information that are being made transparent to many authorities. Tax authorities certainly pay more attention to capital flows and acquisition. Capitals from unknown sources or irregular cash flows are also being exposed, especially regarding those capital activities in relation to tax avoidance.

If you have questions on assets management or cross-border tax issues, please feel free to contact us, we are your GCA team who is always willing to help on your business journey.

 

Global Connect Admin B.V. | Xuan Hao

 

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