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International tax, audit, accounting and legal news
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
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
Protected tenants in private apartments in Croatia: Implementation of the ECHR judgments
30.04.2024The Croatian parliament has adopted a solution to the problem of protected tenants in private apartments, based on the rulings of the European Court of Human Rights (ECHR). This means that owners can receive compensation and reclaim their apartments. The deadlines for this expire in April 2025. The Ecovis experts in Zagreb explain the details of the decision.
On 14 March 2024, the Croatian parliament passed a law to implement the ECHR rulings in the group of cases Statileo v. Croatia and the decisions of the Constitutional Court of the Republic of Croatia.
The problem of protected tenants in private apartments has been around for more than 70 years. These tenants were given occupancy rights in privately owned apartments by the Yugoslavian communist government. These rights ended in 1996 and were replaced by the then newly introduced instrument of protected tenancy (s. box).
Entitlement to ownership vs protected tenancy
The issue centres around the fact that the former state of Yugoslavia previously confiscated private real estate and handed it to random people to live in. From 1996, the government began returning the property but it could not simply move out thousands of families. Owners were required to maintain the properties but were unable to live in, rent or sell them, while the tenants were required to pay a protected, symbolic rent of ca. EUR 100/month.
In 2014, the European Court of Human Rights (ECHR) decided that property owners must be compensated and paid the difference between the market value and the protected rent. The state was also required to resolve the issue once and for all. Previously, compensation was only given to owners if they sued the state individually. The act provides compensation without the need to sue, as well as providing options to tenants.
Who exactly are the protected tenants and the owners?
The dilemma of whether owners could obtain any kind of compensation for the restriction of their property rights was resolved on several occasions by the ECHR, who ruled in favour of the owners. The most important such judgment was passed in 2014 in the case of Statileo v. Croatia.
In 2018, the law on renting apartments was amended. The amendment provided a transitional period after which protected tenants would have to leave the apartments. However, the disputed provisions of that law were annulled by Croation Constitutional Court. The situation has remained unresolved until now.
We support you to regain your property back or asserting your claims.Ema Kalogjera Juranić, Attorney at law, HAČIĆ & KALOGJERA JURANIĆ Law Firm Ltd.*, Zagreb, Croatia
The significance of the law for the rights of owners
This act provides a final solution to the problem of protected tenants and enables the owners to regain their property.
The act foresees three possible ways for owners to regain their property:
- If the owners and tenants agree, the tenant waives the protected tenant status and becomes a regular tenant who pays the market rent.
- The state pays the protected tenant a fee, they waive the protected tenant status, vacate the property and return it to the owner.
- The owner can sell the property to the state for the market value. The State then grants the protected tenant the right to buy the property at favourable price.
In addition, property owners are entitled to compensation for the non-material damage suffered since 1996. This compensation is EUR 0.01 EUR (1 eurocent) per square metre of property used by the tenants per day, starting from 1996 until 1 January 2025, after which the owners will be entitled to the market rent.
It is important to note that the deadline for owners to submit notification of the chosen method of return expires on 30 April 2025.
The deadline for applying for compensation for non-material damage expires on 15 April 2025 and this deadline is preclusive.
For further information please contact:
Ema Kalogjera Juranić, Attorney at law, HAČIĆ & KALOGJERA JURANIĆ Law Firm Ltd.*, Zagreb, Croatia
Email: ema.kalogjera@hkj-legal.hr
*In cooperation with ECOVIS L+C Rechtsanwaltsgesellschaft mbH