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Digital Peru: The challenges of the digital economy and Pillar One
20.05.2024The OECD has issued new tax regulations for Pillar One and the Pillar One – Amount B. They aim to adapt to the ever-evolving digital economy and to avoid undesirable base erosion and profit shifting (BEPS).
What is the situation for businesses?
Digitalisation has transformed the economy, driving new business models and digital markets. This has altered the value creation process and fostered remote activities, posing fiscal challenges for multinational companies that can operate in foreign markets without taxation. Therefore, international tax rules are being reviewed to address the distortion between territoriality and extraterritoriality, emphasising the need for a coordinated international solution to maintain global economic stability.
A brief overview of Pillar One
The OECD’s Pillar One aims to redistribute taxing rights among countries, particularly for Multinational Enterprises (MNEs) in the globalised economy. This involves allocating a portion of MNEs’ residual profits to jurisdictions where the income is generated, using global revenue thresholds and profit margins to determine its application.
- Amount A prioritises profit allocation to revenue-generating jurisdictions
- Amount B simplifies the application of the arm’s length principle in marketing and distribution activities
There are various opinions on this approach, with some suggesting a gradual implementation starting with the largest and most profitable MNEs, say the Ecovis lawyers and accountants.
We support companies in developing tailor-made strategies and optimising tax structures.Octavio Salazar, Partner, ECOVIS Peru, Lima, Peru
Uncertainties about Pillar One and topics to be evaluated
Implementing the OECD’s Pillar One involves adapting international tax norms at the national level, requiring collaborative efforts and possible adoption of multilateral conventions. Although progress has been made in the technical architecture of Amount A, differences and standstills in implementation persist, especially in developing countries like Peru, where limited capacity and experience may hinder the process. Uncertainty persists on issues such as GDP thresholds and the definition of Amount B, posing additional challenges for effective and equitable implementation of Pillar One, especially in developing countries.
Final reflections
The OECD’s Pillar One aims to address the challenges of the digital economy through changes in international tax norms, particularly through Amount A and the rules regarding nexus and income sourcing. However, its implementation faces obstacles such as complexity and high administrative costs, especially in countries like Peru. It is crucial to question whether the proposed modifications will indeed enhance revenue collection and streamline business operations, and whether Pillar One will be a long-term solution or just a temporary measure.
In the face of changes in international tax regulations, it is essential for companies to stay informed about updates and understand how these changes can affect their operations and tax obligations.
For further information please contact:
Octavio Salazar, Partner, ECOVIS Peru, Lima, Peru
Email: octavio.salazar@ecovis.com.pe
Set up a company in the Canary Islands: Reach your goal quickly with the support of experts – a case study
16.05.2024ECOVIS Legal Spain – Canary Islands assists UK recruitment company Recrewit to set up in the Canary Islands and pay 4% corporate tax (ZEC).
Recrewit (see box) started operations in London in early 2021 and quickly grew its client base across the European market. In 2023, the company decided to relocate the base of their operations to a location within the EU. For this they contracted the services of ECOVIS Legal Spain – Canary Islands to assess the possibilities of setting up an entity in the Canary Islands and benefitting from the most beneficial tax regime for companies in Europe (ZEC).
We support companies in setting up in Spain.Natalia Bonilla, Lawyer, Partner, ECOVIS Legal Spain – Canary Islands, Las Palmas de Gran Canaria, Spain
After going through the ZEC eligibility process for 3 months, in March 2024 the company finally received approval for their project from the ZEC board. As a result, they were authorised to set up and operate from the Canary Islands and only pay 4% corporate tax, among other major fiscal advantages.
In their new location, Recrewit will be keeping their international client base, while at the same time they will benefit from the potential of the Canary business community. This includes especially the maritime sector, with the ports of Las Palmas and Tenerife being crucial for maritime trade in the Atlantic and acting as strategic bridges between three continents.
About Recrewit
Recrewit is a boutique recruitment consultancy firm operating within the engineering industry, extending first-class customer service to candidates and clients across four key sectors: aviation, automotive & motorsport, marine and renewables.
“Natalia has been thorough and extremely helpful throughout the whole process, we honestly don’t think we could have done it without ECOVIS Legal Spain – Canary Islands and highly recommend Ecovis for the ZEC application process and ongoing business operations. ECOVIS Legal Spain – Canary Islands’ advice has been fundamental to the success of our application!”
Alex Bello Pérez, Co-Founder – Recrewit Ltd.
During the ZEC eligibility process, ECOVIS Legal Spain – Canary Islands supported Recrewit and provided legal advice on the ZEC regime and requirements, as well as company incorporation and employment regulations concerning the hiring of new staff. Following the successful resolution from the ZEC board, ECOVIS Legal Spain – Canary Islands continues to provide legal advice to the client to ensure a successful and smooth start of operations in the archipelago.
For further information please contact:
Natalia Bonilla, Lawyer, Partner, ECOVIS Legal Spain – Canary Islands, Las Palmas de Gran Canaria, Spain
Email: natalia.bonilla@ecovis.es
How to pay in China: China’s cashless revolution – a guide to new payment options
13.05.2024Foreign employees and visitors in China can now pay with international cards, such as Mastercard or Visa, by scanning QR codes online or directly on site. The Ecovis experts explain the new cashless payment options.
In recent years, payment in China has undergone a remarkable transformation, evolving into an almost cashless society characterised by mobile solutions. While this payment method has not yet arrived in Germany, it is ubiquitous in China and simplifies people’s everyday lives. It has now become much easier for foreign visitors to use this new payment method locally.
Updating the digital payment system
Alipay, a leading mobile payment app operated by the Alibaba subsidiary Ant Group, forms the cornerstone of China’s digital payment system, alongside WeChat Pay, which is owned by Tencent. As of July 2023, these two major mobile payment platforms have introduced a significant update that allows users to link international cards, including Mastercard and Visa. This integration enables the seamless payment for goods and services online or in person by scanning QR codes.
In addition, there was a recent change to the guidelines for WeChat Pay and Alipay which also benefits both international tourists and business travellers. In future, foreign visitors will be able to spend up to USD 50,000 per year with the mobile payment apps. This is a significant increase on the previous limit of USD 10,000, which considerably expands the financial options for foreigners. For individual transactions, the limit has been raised from USD 1,000 to 5,000.China is once again showing how digitalisation can be used to drive growth.Richard Hoffmann, Lawyer, ECOVIS Rechtsanwaltskanzlei Richard Hoffmann, Heidelberg, Germany
China’s pioneering role in payments
The remarkable shift in Chinese payments reflects the country’s innovation and opens the doors for smoother global interaction. The recent developments in Alipay and WeChat Pay are helping foreign visitors navigate a digital cashless society. By integrating international cards and adjusting transaction limits, China is leading the way in the digitalisation of payments and sharing the benefits of these innovations with the world.
For further information please contact:
Richard Hoffmann, Lawyer, ECOVIS Rechtsanwaltskanzlei Richard Hoffmann, Heidelberg, Germany
Email: richard.hoffmann@ecovis.com