Base Erosion and Profit Shifting (“BEPS”) Impact on Hong Kong SAR & Malaysia

1. On July 1 2021, 130 countries approved a statement providing a framework for reform of the international tax rules. These countries are members of the OECD/G20 Inclusive Framework on BEPS (IF), comprising 139 countries. 

2. The statement sets forth the key terms for an agreement of a two-pillar approach to reforms and calls for a comprehensive agreement by the October 2021 G20 Finance Ministers and Central Bank Governors meeting, with changes coming into effect in 2023.  

3. Pillar one of the agreement is a significant departure from the standard international tax rules of the last 100 years, which largely require a physical presence in a country before that country has a right to tax. 

4. Pillar two secures an unprecedented agreement on a global minimum level of taxation which has the effect of stipulating a floor for tax competition among jurisdictions.

5. The Multilateral Instrument (“MLI”) was signed in June 2017 by more than 70 jurisdictions, and represents one of the most important changes to-date to cross-border tax norms. Malaysia became a signatory to the MLI on 24 January 2018; and ratified the MLI on 4 August 2020 when the Malaysian MLI Order was gazetted. On 18 February 2021, Malaysia deposited the instrument of ratification with the OECD; and the MLI entered into force for Malaysia on 1 June 2021. 

Spin-offs, Start-ups & Cooperation Models in Germany

1. Germany’s start-up scene is in a state of flux: a new generation of business founders is emerging who have many things in common – they pursue research and development as a matter of course, use digital technologies and launch businesses that they want to see expand in the future. These young start-ups develop technologies for medical product innovations, new forms of mobility or applied artificial intelligence.

2. One such young and innovative company is the multi-award-winning start-up ArtiMinds Robotics. ArtiMinds has developed software that allows industrial robots to be programmed quickly and intuitively: the robot copies human movements and learns how to react flexibly to problems. It can then reliably solve even complex tasks.

3. An idea that is as brilliant as it is convincing, this has been a real success story. A 2013 spin-off from the Karlsruhe Institute of Technology (KIT) has evolved into a technology company employing over 60 people and supplying the world market from its Karlsruhe base.

Shanghai's Initiatives, Incentives and Measures in Lingang Special Area of China (Shanghai) Pilot Free Trade Zone (FTZ)

1. China’s central government has offered tax incentives, greater autonomy in local legislation and more administrative power to liberalise the capital markets in Shanghai, as Beijing envisions building Pudong into a “brilliant pearl” of a strong socialist country.

2. The document is being seen by city officials and the business community as a grand blueprint for Shanghai’s development until 2050.

OECD's Pillar 1 And Pillar 2 Solution to Address the Tax Challenges

1. On October 12, 2020, the Organisation of Economic Co-operation and Development (OECD) released “blueprints” of proposed solutions to address tax challenges arising from the accelerating digitalization and globalization of the world economy.

2. The Pillar 1 and Pillar 2 OECD blueprints focus on nexus and profit allocations, in addition to base erosion and profit shifting (BEPS) challenges.