Search for:
  • Home/
  • Blog/
  • What are the top 10 changes in international taxation that impacted businesses this year?

What are the top 10 changes in international taxation that impacted businesses this year?

1. OECD’s Pillar One and Pillar Two initiatives: The Organization for Economic Cooperation and Development (OECD) proposed two new global tax reform plans to address the challenges of the digital economy and base erosion and profit shifting (BEPS). These initiatives seek to create a more equitable distribution of taxing rights and establish a minimum global corporate tax rate.

2. Brexit implications: The United Kingdom officially left the European Union on January 31, 2020, leading to changes in tax regulations for businesses operating in the UK and EU. New trade agreements, customs duties, and potential tax changes impact cross-border businesses.

3. COVID-19 relief measures: Governments worldwide introduced various tax relief measures to support businesses during the COVID-19 pandemic. These measures included tax exemptions, deferral of tax payments, and incentives to mitigate financial hardships.

4. Digital Services Taxes (DST): Several countries implemented or proposed DSTs, specifically targeting multinational digital companies. Such taxes aim to capture revenue from digital activities that previously created tax challenges due to the lack of physical presence.

5. Cross-border e-commerce tax compliance: Many countries enhanced their tax regulations to address the growing cross-border e-commerce sector. This includes imposing taxes on online sales, collecting VAT/GST on digital services, and establishing reporting requirements for foreign companies selling to local customers.

6. Country-by-Country Reporting (CbCR) requirements: Governments introduced or reinforced CbCR regulations, requiring multinational companies to disclose detailed information on their global operations to ensure transparency and combat tax avoidance.

7. Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI): The MLI, an initiative under the BEPS project, came into effect in various countries, impacting existing tax treaties. The MLI aims to prevent treaty abuse and improve dispute resolution mechanisms between countries.

8. Economic substance requirements: Several jurisdictions implemented economic substance rules to combat tax avoidance and ensure that companies have real operating activities in the jurisdictions where they claim tax benefits.

9. Interest Limitation Rules: Many countries enacted or altered interest limitation rules in line with BEPS Action 4 recommendations. These rules limit the amount of deductible interest expenses to curb multinational profit shifting through excessive interest deductions.

10. Increased tax scrutiny and enforcement: Governments worldwide enhanced tax scrutiny and enforcement measures to reduce tax evasion and aggressive tax planning. This involved increased information sharing between tax authorities, stricter penalties for non-compliance, and the use of advanced data analytics to detect tax avoidance schemes.

It is important to note that tax regulations can vary between countries, so businesses must consider the specific changes relevant to their operations. Consulting with tax professionals or organizations specializing in international taxation is advisable to navigate these complexities accurately.

Leave A Comment

All fields marked with an asterisk (*) are required