EY Tax Legal News - United .3 | EY Tax & Legal News – Issue 4-6/2017 Action Plan against tax fraud

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  • I | EY Tax & Legal News Issue 10/2014

    EY Tax and Legal Services

    EY Tax & Legal NewsTax and Legal Services

    Issue4-6/2017

    2 Corporate and Personal TaxationOECD releases Discussion Draft of implementation guidance on hard-to-value intangiblesAction Plan against tax fraud for 2017 2018

    4 Value Added Tax Slovak Financial Administration plans to implement Electronic Transport Control System (ETCS) for monitoring cross-border transfer of goods

    5 Legal news Amendment to the Commercial Code the end of tunnelling? New faster enforcement of receivables

    7 News in brief

    mailto:slavomira.popjakova@sk.ey.com

  • 2 | EY Tax & Legal News Issue 4-6/2017

    Corporate and Personal TaxationOECD releases Discussion Draft of implementation guidance on hard-to-value intangibles

    The Organisation for Economic Co-operation and Development (OECD) recently released a Discussion Draft of its implementation guidance on hard-to-value intangibles (HTVI) in connection with Action 8 of its Base Erosion and Profit Shifting (BEPS) Action Plan.

    Summary

    The Discussion Draft provides guidance on the implementation of the approach to HTVI which are defined by previous OECD materials as intangibles or rights in intangibles for which, at the time of their transfer between associated enterprises, (i) no reliable comparables exist, and (ii) at the time the transactions are entered into, projections of future cashflows or income expected to be derived from the transferred intangible, or the assumptions used in valuing the intangible are highly uncertain, making it difficult to predict the intangibles success at the time of the transfer.

    In summary, the OECD-recommended HTVI approach authorizes tax administrations to use ex post evidence on the financial outcomes of an HTVI transaction (i.e., information gathered in hindsight about how valuable an intangible has become) as presumptive evidence on the appropriateness of the ex ante pricing arrangements.

    The Discussion Draft contains three sections, which present:

    The principles that should underlie the implementation of the HTVI approach

    ThreeexamplestoclarifytheimplementationoftheHTVIapproach in different scenarios

    TheinteractionbetweentheHTVIapproachandtheaccesstothe mutual agreement procedure under the applicable treaty.

    The guidance included in the Draft is aimed at reaching a common understanding and practice among tax administrations on how to apply adjustments resulting from the application of the HTVI approach. The document does not represent a consensus view of the OECDs Committee on Fiscal Affairs, but it was released in draft form in order to gather public comments on the topic, to be submitted by 30 June 2017.

    Implications

    The guidance included in the Draft should improve tax administrations consistency in applying the HTVI approach and reduce the risk of economic double taxation in cases of intercompany transactions relating to such intangibles. It is therefore important for MNE Groups to continue to monitor developments in this area in the OECD and in the countries in which it operates, and to consider actively engaging with policymakers in this international tax debate.

    If you would like to know more about the topic or have any other questions regarding this issue, please contact the author of this article or your EY partner or manager.

    http://www.oecd.org/tax/transfer-pricing/BEPS-implementation-guidance-on-hard-to-value-intangibles-discussion-draft.pdfhttp://www.oecd.org/tax/transfer-pricing/BEPS-implementation-guidance-on-hard-to-value-intangibles-discussion-draft.pdfmailto:lubica.liscakova@sk.ey.commailto:shabab.khan@sk.ey.com

  • 3 | EY Tax & Legal News Issue 4-6/2017

    Action Plan against tax fraud for 2017 2018

    The Slovak Ministry of Finance, together with the Ministries of Justice and the Interior, has published a draft Action Plan against tax fraud for 2017 2018. The Action Plan contains 21 new measures aimed at eliminating new forms of tax fraud and enabling more effective cooperation between tax authorities engaged in fighting them.

    These measures are aimed primarily against fraudulent practices in company mergers and acquisitions (M&A) and to prevent other forms of tax evasion. You can find a summary of all the measures on the Government website.

    Below, we briefly describe some of the measures being considered that could have an impact on your business:

    Merger of companies

    The aim of the measure is to prevent the abuse of M&A regulations stemming from commercial law. The M&A regulation is currently abused by some taxpayers in order to avoid fulfilling their obligations to state authorities and other creditors. In this connection, the Ministry of Justice has already prepared and published a draft amendment to the Commercial Code which should come into effect on 1 October 2017. According to the amendment proposal, the draft plan for a merger agreement or demerger project will have to be submitted to the tax administrator at least 60 days before the planned approval date.

    Electronic Transport Control System (ETCS)

    The aim of the measure is to develop a new tool that will enable control of the physical movement of goods in real time. The new tool would work together with already established Electronic Tolling System and other supporting systems installed directly into roads (e.g., dynamic weights). The intent of ECTS is to combat fraudulent activities in the areas

    of VAT and excise duties, related to the transportation of goods for both intra-community and domestic supplies.

    Index of taxpayers reliability

    The Finance Directorate of the Slovak Republic (FRSR) intends to create its own internal (non-public) index to assess the tax and excise duty reliability of taxpayers. The index information about a particular taxpayer should be known only to that individual taxpayer and the FRSR. Taxpayers will be assessed on publicly known criteria, but the weighting given to individual criteria in determining the index will not be publically available. In the future, it is planned to provide certain benefits for more reliable taxpayers and a stricter regime for those less reliable, based on this index.

    Introduction of cumulative protocol

    The purpose of the measure is to enable preparation of a single protocol from the tax audits of several taxpayers performed at the same time. Introduction of this cumulative tax audit protocol should ease the audit chain of interconnected business transactions. It should also enable production of a single comprehensive document which could be used for all audited taxpayers participating in the chain of transactions, potentially involving VAT fraud. Thus, situations where a chain of transactions was considered legal in one tax audit and fraudulent in another, should no longer occur.

    FRSR will be entitled to enter into final building approval process

    The main aim of this measure is to combat tax avoidance in the real estate sector. During the final building approval process, the tax administrator will be able to participate in the proceedings and check whether the taxpayer (construction firm and also direct or indirect suppliers) has fulfilled all accounting and tax obligations and also if they are able to prove the use of all

    http://www.rokovania.sk/Rokovanie.aspx/BodRokovaniaDetail?idMaterial=26460https://www.slov-lex.sk/legislativne-procesy/SK/LP/2017/248mailto:miroslav.marcincin@sk.ey.com

  • 4 | EY Tax & Legal News Issue 4-6/2017

    material consumed and services received in connection to the buildings construction.

    Other planned changes include:

    Broadeningtheuseofelectroniccashregisterswithon-lineconnection to the tax authorities

    Expandinguseoftheso-calledsuper-seizuremeasure(superzaisovacprkaz)

    Thepossibilityofcancellingabusinesslicenseforrepeatedbreach of obligations under the Accounting Act

    The measures published in the draft Action Plan show the direction the fight against tax fraud will take in the near future. The way in which individual measures will be adopted depends on the form and scope of implementation of concrete legislative regulations. We will monitor the implementation of individual measures and inform you about important legislative changes connected to this topic in following editions of EY Tax and Legal News.

    If you wish to obtain further information, or have any questions regarding the above, please contact the author of this article or your partner or manager at EY.

    Value Added Tax Slovak Financial Administration plans to implement Electronic Transport Control System (ETCS) for monitoring cross-border transfer of goods

    As a consequence of persistent tax fraud and the high level of VAT gap below expected revenues (28.6% in 2015), the Financial Administration of the Slovak Republic (FASR) intends to streamline the system of VAT fraud identification. Inspired by the Hungarian EKER system, FASR will focus on monitoring cross-border transfer of goods.

    The Ministries of Finance and Transport and Construction have committed to preparing a draft analysis on implementing the ETCS as part of an update to the Action Plan for combating tax fraud. FASR believes that implementation of the ETCS could significantly reduce tax fraud in cross-border transfers of goods.

    The objective of the system will be to monitor goods movements within the territory of the Slovak Republic connected to the existing toll system, cameras and dynamic weights. It is expected

    that after its implementation, fictitious transfers of goods and tax fraud will decrease. At the same time, online monitoring of goods movement will be assured, cooperation between tax authorities and taxpa