09/08/23

BERMUDA: International tax announcement expected

As published on: royalgazette.com, Wednesday 9 August, 2023.

David Burt, the Premier and Minister of Finance, is expected to make a major announcement to update the island on the international tax issue.

The media briefing comes as the Organisation for Economic Co-operation and Development appears to have made major headway in efforts to usher in a new era of international tax that could change for ever the relationship between onshore and offshore.

The organisation has published a statement of near-term desired outcomes, with the text of a multilateral convention needing just a few technical points to be resolved.

The publication of the convention is now imminent, with the OECD hoping for it to be signed by the end of the year, and with a final goal of legislative approvals from the various governments shortly thereafter.

The OECD said in a statement: “The OECD secretary-general tax report to G20 finance ministers and central bank governors highlights the historic milestone reached last week [July] by 138 countries and jurisdictions who agreed an outcome statement summarising the package of deliverables developed by the inclusive framework on the remaining elements of the two-pillar solution to address the tax challenges arising from the digitalisation of the economy.

“These deliverables include a framework for the simplified and streamlined application of transfer pricing rules to certain marketing and distribution activities and a subject to tax rule which will enable developing countries to update bilateral tax treaties to ‘tax back’ in respect of certain intragroup income where such income is subject to low or no nominal taxation in the other jurisdiction.”

Consultation on some parts of this is open this summer until September 1, with an aim for agreements by the end of the year.

The group said strong progress on advancing tax transparency continues.

The report to G20 finance ministers and central bank governors sets out the latest developments on the Crypto-Asset Reporting Framework and amended Common Reporting Standard, noting that the OECD has completed the technical work on the international exchange architecture for both frameworks.

The OECD said: “As a result of tax transparency efforts since 2009, close to €126 billion of additional revenues have been identified by governments, of which over €41 billion is by developing countries. The numbers of jurisdictions participating in the automatic exchange of information and the amount of information exchanged continue to increase; in 2022, information on over 123 million financial accounts worldwide, covering total assets of above €12 trillion, was exchanged automatically.”

The new era could mean a substantial new source of revenue for the coffers of the Bermuda Government.

A deal with the OECD and nearly all of the world’s other major economies could force Bermuda to alter or abandon a tax system that, at present, incurs no taxes on profits, income, dividends or capital gains, has no limit on the accumulation of profit, and has no requirement to distribute dividends.

Tax assurance certificates, which exempt companies and various other corporate entities assert that any parliamentary imposition of such taxes, will not be applicable to the company and its operations in future years. At present, the tax assurances being granted extend to March 31, 2035.

The OECD has sought to redistribute corporate tax profits of the world’s 100 biggest companies to countries based on where they sell goods and services.

It also wants to set an effective minimum corporate tax rate of 15 per cent for companies with annual revenue of at least €750 million.

Tags

Bermuda International Tax Offshore Tax