[World Tax News] OECD Releases Report on ‘Amount B of Pillar One’ and More

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Editorial Team – [2024] 159 taxmann.com 639 (Article)

World Tax News provides a weekly snippet of tax news from around the globe. Here is a glimpse of the tax happening in the world this week.

1. OECD releases report on ‘Amount B of Pillar One’

On February 19 2024, the OECD/G20 Inclusive Framework on BEPS released the report on Amount B of Pillar One, which provides a simplified and streamlined approach to the application of the arm’s length principle to baseline marketing and distribution activities, with a particular focus on the needs of low-capacity countries.

The approach set out in this report answers the call of low-capacity countries for what the African Tax Administration Forum (ATAF) has described as “vital” changes to the OECD Transfer Pricing Guidelines, providing what “could be a game changer for the African transfer pricing landscape”.

Drawing from existing principles in the OECD Transfer Pricing Guidelines, Amount B provides a simplified and streamlined pricing framework that determines a return on sales for eligible distributors. This framework is expected to reduce transfer pricing dispute compliance costs and enhance tax certainty for tax administrations and taxpayers alike. Low-capacity jurisdictions facing limited resources and data availability will especially benefit from the administrative simplification provided by Amount B.

The report introduces two implementation options for jurisdictions that opt into the simplified and streamlined approach from January 2025. It describes the circumstances under which a distributor is within the scope of Amount B, including cases where it also performs certain non-distribution activities, such as manufacturing. It also sets out the activities that may exclude a distributor from the scope of the simplified and streamlined approach, such as the distribution of commodities or digital goods.

The inclusion of the Amount B guidance into the OECD Transfer Pricing Guidelines is accompanied by conforming changes to the Commentary on Article 25 of the OECD Model Tax Convention. The conforming changes signpost specific language relating to tax certainty and the elimination of double taxation included in the report on Amount B and are intended to ensure optionality is preserved in all dispute resolution mechanisms for non-adopting jurisdictions.

Source: Release

Report on Amount B of Pillar One

2. Zimbabwe releases Public Notice for 2024 Tax Changes; introduces Pillar 2 Global Minimum Tax

The Zimbabwe Revenue Authority (ZIMRA) released Public Notice 9 of 2024, offering a summary of the primary tax adjustments outlined in the Finance Act 2023 (Act No. 13 of 2023), effective January 1, 2024. These adjustments align closely with the provisions laid out in the 2024 Budget Statement, encompassing the following measures:

(a) Increased tax-free threshold:

With effect from January 1 2024, the tax-free threshold was increased to ZWL$9,000,000.00 for remuneration earned in ZWL. The revised tax table for Remuneration in Zimbabwean Dollars is as follows:

(b) Domestic Minimum Top-Up Tax

The DMTT (Digital Minimum Tax Threshold) will be imposed at a minimum corporate tax rate of 15%. The calculation of DMTT will be based on the effective tax rate applied to the profits generated in a specific jurisdiction, rather than that jurisdiction’s statutory corporate income tax rate.

Source: Public Ruling

3. Ukraine provides guidance on the Advance Pricing Agreements

The Ukrainian State Tax Service has recently issued a statement outlining the protocols for advance pricing agreements (APAs) concerning controlled transactions.

Transfer pricing rules have been in force in Ukraine for 10 years, introduced on September 1, 2013, and have become an important tool for combating tax evasion and ensuring the stability of the revenue part of the budget.

The process of establishing legislative rules on transfer pricing is accompanied by implementation into the Tax Code of Ukraine (hereinafter – Code) of the OECD guidelines, steps of the BEPS Action Plan, GAAR rules, joining the CRS/CbC exchange and general active movement towards European integration.

Advance pricing arrangement procedures in controlled operations were absent in domestic tax legislation before introducing transfer pricing rules.

Advance pricing arrangement in controlled operations is a procedure between major taxpayer and central executive body that implements state tax policy, during which criteria for determining compliance of conditions of controlled operations carried out or to be carried out by major taxpayer with the “arm’s length” principle based on contract for a limited period are agreed.

Source: Release on APA Procedures