Towards the end of last year, the European Union reached an agreement on its Pillar Two Directive, leaving a year for Member States to implement it in domestic law. The OECD also released its guidance regarding safe harbor and Penalty Relief, as well as public consultations on GloBE information Return and Tax Certainty for the GloBE Rules. Please join our experts, including those on tax policy, as well as economists and tax professionals across the globe to discuss the most recent updates and fresh insights on this topic each month. The first session in the series is on 8 February 2023.
On 9 December 2022, Treasury and the IRS published final regulations relating to the centralized partnership audit regime. These “2022 Partnership Audit Regulations” generally follow the framework in the proposed regulations on the topic issued on 24 November 2020. Most notably, the 2022 Partnership Audit Regulations provide further guidance and clarification on certain partnership-related items that may be excepted from the centralized partnership audit regime and alternative rules that may apply to such excepted items.
Various new corporate income tax measures entered into force in Belgium as of 1 January 2023, the most impactful being a temporary increase of the minimum corporate tax base under the so-called “basket rule”. This measure will be in force until the European Minimum Tax Directive (Pillar Two) is implemented into Belgian legislation and takes effect (in principle as of 1 January 2024).
On 8 December 2022, the Court of Justice of the EU rendered its first judgment with respect to the EU directive n° 2018/822 of 25 May 2018, i.e., DAC 6. The CJEU ruled that the legal obligation for a lawyer-intermediary, subject to legal professional privilege, to inform other intermediaries is invalid in light of the right to privacy, as protected by Article 7 of the Charter of Fundamental Rights of the European Union.
In May 2022, the Indo-Pacific Economic Framework for Prosperity (IPEF) was launched between Australia, Brunei, Fiji, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, the US and Vietnam. On account of its specified focus on labor standards and issues, IPEF is likely to have an ongoing impact on labor regulations and trends among partner countries, including Vietnam.
The implementation of Pillar 2, a principal rule of the Organization of Economic Cooperation and Development’s 15% global minimum tax proposal, has been debated for several years. Recently, Japan took a firm step towards affirming its adoption of Pillar 2 when the country outlined its 2023 Tax Reform Package, which included the implementation of the 15% global minimum tax. The Package also introduced an Income Inclusion Rule that in broad terms, aligns with the Global Anti-Base Erosion (GloBE) Model Rules, expected to become effective in 2024. This affirmative step by Japan puts some pressure on other states that have committed to implementing the GloBE rules, particularly in the European Union (EU), the United States (US) and South Africa.
Looking to the year ahead, Baker McKenzie commissioned a survey of 600 senior lawyers across the globe and uncovered that corporations expect more disputes this year, driven by economic uncertainty, global trade shifts and altered business models. Disputes around cybersecurity/data and ESG rank as emerging risk areas, while tax and employment disputes remain a constant consideration for organizations. To help stay abreast of emerging challenges and prepare to navigate the changing disputes landscape, join our experts across the globe in a series of webinars as they unpack findings from our latest report, The Year Ahead: Global Disputes Forecast 2023, and uncover a practical, actionable way forward.
On 16 December 2022, Japan announced its 2023 tax reform proposal, which contains a number of changes that may impact multinational companies doing business in Japan, including the introduction of Pillar Two legislation in Japanese domestic tax law.
Exactly one year after publication of the Pillar 2 Model GloBE Rules on 20 December 2021, the OECD Inclusive Framework on BEPS published an implementation package as part of its ongoing efforts to develop the Pillar 2 Implementation Framework. The Pillar 2 documents released contain (i) guidance on Safe Harbours and Penalty Relief, and (ii) public consultations on the GLoBE Information Return and Tax Certainty for the GloBE Rules.
On Tuesday, 20 December 2022, the OECD released a highly anticipated consultation document on Digital Services Taxes (DSTs) and relevant similar measures. This consultation document provides draft articles for inclusion in the Multilateral Convention to implement the agreement reached by members of the Inclusive Framework with respect to DSTs and relevant similar measures.