Dr. Dirk Elbert

Tax authorities around the world have recently stepped up their scrutiny of intercompany financial transactions, in what they see as another front in their efforts to curb abusive transactions. Germany, for example, recently introduced comprehensive changes to its intercompany financing rules, effective 1 January 2024. However, the tax authorities may apply the new regulations to all open cases.

After years during which the OECD’s two-pillar framework has been the main topic of conversation in international tax and transfer pricing circles, a new topic is gaining prominence – the adoption of public country-by-country reporting (CbCR) requirements. In a push for greater tax transparency, the EU took the lead, and adopted a public CbCR directive that entered into force on December 21, 2021, and applies to fiscal years beginning on or after 22 June 2024.

On 19 February 2024, the OECD/G20 Inclusive Framework on BEPS released the “Report on Amount B of Pillar One” (‘the Report’). It comes as part of the OECD’s Two‐Pillar Solution to address the Tax Challenges Arising from the Digitalisation of the Economy. While under Pillar Two multinational enterprises (‘MNE’) shall be subject to tax in each jurisdiction at a 15% effective minimum tax rate regardless of where they operate, Pillar One is about the development of subject to tax rules and an implementation framework.

The OECD recently took what at first glance seems like a big step forward in its drive towards finalisation of its two-pillar framework to address the tax challenges arising from the digitalisation of the global economy: the release of a multilateral convention to implement Amount A of Pillar One. However, technical issues remain, and the convention is not actually open for signature while differences of opinion are ironed out. 

It is rare for an issue of our Global Transfer Pricing newsletter not to be dominated by news of the OECD’s project on the taxation of the digital economy. But in this issue,  domestic consultations take centre stage.

Perhaps the only story that could surpass the interest generated by the OECD’s taxation of the digital economy saga is Brazil’s path to adoption of the OECD’s transfer pricing guidelines and the arm’s length principle.

Germany has well over 100 double taxation agreements (DTAs) with other countries. The history of DTAs goes back more than 150 years. Double taxation agreements are primarily aimed at avoiding double taxation.

The transfer pricing obligations in Denmark were tightened significantly with effect for financial years from 2021. Practice has shown that foreign groups are often not aware of their obligation to submit transfer pricing documentation in Denmark, although penalties can be material.

The OECD’s project on the taxation of the digital economy continues to generate headlines, most recently with the announcement on 12 December that the EU member states had reached agreement to recommend that the Council of the European Union adopt the proposed Pillar Two directive that would ensure the largest multinational enterprise groups in the EU pay a minimum rate of tax.

The 40th issue of BDO’s Transfer Pricing Newsletter focuses on international developments as well as recent developments in OECD, Netherlands, United Kingdom, and many more. 

The 39th issue of BDO’s Transfer Pricing Newsletter focuses on international developments as well as recent developments in Brazil, United Kingdom, United States, and many more.