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VII.Tax
promotion of a product even though the marketing activity may indirectly result in an order being placed.
Given that the U.K. has recently enacted the DPT (which applies from April 1, 2015), it is not yet clear to what extent it will adopt the OECD recommendations. The work on the multilateral instrument that will form the basis to update the bilateral instruments is ongoing. However, the U.K. could unilaterally adopt the recommendations in its domestic law, which would apply where no treaty is in force with a particular jurisdiction (for example, Bermuda).
In addition, the OECD recommends that if an agent acts exclusively or almost exclusively for connected persons, it will not be capable of being an independent agent. Combined with the expanded definition of dependent agent PE, this is potentially relevant to structures involving a U.K. sales and marketing function for the benefit of an affiliate non-U.K. insurance carrier.
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annual consolidated group revenue of £586 million or more in any 12-month accounting period are required to submit an annual report to H.M. Revenue & Customs (“HMRC”) for the following period. The regulations are effective for accounting periods beginning on or after January 1, 2016, so the first filing will be due by December 31, 2017. The template report follows the OECD format. For each jurisdiction in which the MNE group operates, the following information will have to be detailed and filed electronically:
revenues (split between related and unrelated entities); profit (or loss) before income tax;
income tax paid (on a cash basis);
income tax accrued (for the current year);
capital;
retained earnings;
number of full-time employees; and
tangible assets (other than cash and cash equivalents).
The CBCR will automatically be shared under the U.K.’s international agreements for the exchange of information, such as the U.S./U.K. Double Tax Treaty or the U.K./Bermuda Tax Information and Exchange Agreement.
Groups may wish to carry out a trial run, using 2015 data, to make sure that the systems are in place to gather the relevant information, and also to see what picture is presented by the data and anticipate any queries from the local and overseas tax authorities.
c. Common Reporting Standard
In March 2015, the U.K. government issued the International Tax Compliance Regulations 2015 (“Regulations”) (along with draft guidance notes in September 2015), giving effect to the three separate international agreements to which it is a party:
Multilateral Competent Authority Agreement on the Automatic Exchange of Financial Account Information, implementing the OECD’s Common Reporting Standard (“CRS”);
Developments and Trends in Insurance Transactions and Regulation 2015 Year in Review
b. Country-by-Country Reporting
In the 2014 Year in Review, we outlined the country-by- country reporting regime that was proposed under Action 13 of the BEPS Project. The regime is designed to help tax authorities gather information on multinational groups’ global activities, profits and taxes, so as to enable them to identify possible mismatches and risks and hence concentrate their anti-avoidance efforts. A final report has since been released, confirming the OECD’s three-tiered approach to transfer pricing documentation:
(i) Local files;
(ii) Master file; and
(iii) Country-by-country reporting (“CBCR”).
The U.K. government published draft regulations on October 5, 2015 to implement the last tier, the CBCR. The consultation period closed in November 2015. It is not yet clear whether any changes will be made to the regulations as a result of the submissions.
Under the draft regulations, multinational groups (“MNE groups”) with a U.K. resident parent entity and a combined