Wherever your company is based, it's likely that you need to comply with certain taxation regulations. These may be more flexible in some parts of the world, compared to others, but most businesses have to consider the impact of taxation on their profits and overall success of their model. For international companies, one of the biggest challenges is navigating numerous taxation issues when they operate in multiple countries that may have different - or even conflicting - laws. Understanding what changes are happening over the next 12 months, can help you ensure you don't fall short of any legislation and adhere to the laws that apply to you and your business.
We've rounded up some of the biggest tax issues for the year ahead that will affect companies operating in some of the world's biggest economies, so you can be proactive about taking control of your finances this year.
Base Erosion and Profit Shifting policies
Launched by the Organisation for Economic Cooperation and Development (OECD), the Base Erosion and Profit Shifting policy aims to help drive down tax evasion by highlighting gaps in legislation that allow companies to move their profits to low or no-tax countries.
The OECD is supported by 35 countries including France, Germany, the UK, and Spain, and will affect any businesses doing trade in any of the member states. Approved by the G20 in December 2015, the strategy looks to move towards a standardised taxation system so that companies can't resort to so-called 'tax haven' countries. However, it's not just those who are making the most of legislation loopholes that need to be aware of this, as the initiative will see a lot more focus being placed on international companies operating in numerous countries.
Uncertainty in the US
Firms operating in North and Central America - or who have part of their supply chain that does - could face increased taxes. President Trump has proposed introducing increased taxes for the countries the US shares a border with. It's been suggested that Canada would have to pay a 20 per cent tax on anything imported into the US, while Mexico could also see its taxes increase if the controversial wall plans go ahead.
However, there are suggestions that corporate tax would be reduced from 35 per cent to 15 per cent for businesses in the US. There is a great deal of uncertainty about what changes could happen in the US, but leading experts think the proposals could have a significant financial impact on companies in North and Central America.
At the end of 2016, the Australian Government announced the start of a new treaty between itself and Germany, which was signed back in 2015, and replaced the previous one agreed in 1972. The rules comes into effect from the start of 2017 and will make changes to tax rates and even pension schemes. It looks to update previous tax agreements and crack down on tax avoidance in ways outlined by the OECD.
The new treaty could also affect all cross-border transactions outside of Germany and Australia as more companies look to introduce new legislation to implement the OECD’s BEPS measures.
Belgium has already published its obligations following its formal adoption of the OECD BEPS Action 13 - country-by-country reporting - requirements. It's likely that many other OECD countries will try and introduce new treaties to officially implement the rules outlined by the 35-member body, which could affect many businesses.
Overhaul in China
In 2016, China started its biggest overhaul of taxes for more than two decades and it's likely to have an impact on businesses in all sectors this year. The new system means that taxes in construction, property, finance and consumer service will now be applied to the value added, while manufacturers that already have a value-added tax structure will get better tax breaks for research and development. It's hoped these changes will help some of the more traditional sectors modernise and innovate in the country and is estimated to save businesses around 500 billion yuan ($77 billion) in one year.