OECD corporate tax measures to hit SMEs with red tape
Proposed global measures designed to combat corporate tax avoidance among multinationals will also impact small and medium-sized businesses looking to internationalise, a tax expert has told the Irish Independent.
The Paris-based Organisation for Economic Cooperation and Development (OECD) had been tasked with the world's biggest economies to look into closing off the ways that multinational businesses can avoid paying tax on their profits.
It published its final recommendations on Monday, with tax experts warning they will pose a regulatory and compliance burden on companies.
Kevin Doyle, international tax partner with chartered accountants BDO, said the measures shouldn't be ignored by SMEs believing the so-called Base Erosion and Profit Shifting (Beps) project relates only to global corporations. "We work with plenty of small to medium-sized businesses which have internationalised and they will have to watch for the impact of these changes to them down the line," Mr Doyle said.
"They're not just for the much larger multinational."
The final package of BEPS measures includes new minimum standards on country-by-country reporting, which for the first time will give tax administrations a global picture of the operations of multinational enterprises; treaty shopping, to put an end to the use of conduit companies to channel investments; curbing harmful tax practices, in particular in the area of intellectual property and through the automatic exchange of tax rulings; and effective mutual agreement procedures, to ensure that the fight against double non-taxation does not result in double taxation.
Country-by-country reporting will only affect larger multinationals, but Mr Doyle said the measures around treaty shopping, for example, could affect SMEs, as well as changes to permanent establishment rules.
"At the moment we would see clients talk about going to Asia or China and they might feel that a suitable sub-holding company location is the likes of Singapore," he said.
"Now it would appear that maybe that idea of using a sub- holding company may not work if you can't access treaties."