Montenegro failed to be one of the signatories of the Multilateral Agreement on the Implementation of Measures Related to Agreements on the Avoidance of Double Taxation in Paris on June 7 this year.
The goal of those measures is to prevent companies from using less profit tax through profit shifting, that is, the erosion of the salary tax base. The most famous such case in Montenegro is when the company Telenor Montenegro moved its founder's headquarters from Norway to Denmark, demanding that Montenegro recognize tax benefits based on the agreement between the former SFRY and Denmark. The dispute between Telenor and the Tax Administration lasted four years. In 2012, the tax authorities first established the obligation for Telenor to pay a tax of 214 million euros on the accumulated 27,2 million euros of profits, which it had lent to its founder for years. At the beginning of last year, the Ministry of Finance accepted that Telenor should pay 11 million in taxes.
Montenegro was not among the 76 countries and jurisdictions that signed the contract, and the Ministry of Finance told "Vijesti" that they will initiate the procedure for signing the contract with the Government.
"On June 28 of the current year, through the Ministry of Foreign Affairs, the Ministry of Finance received a letter from the Director of the Center for Tax Policy and Administration of the Organization for Economic Cooperation and Development (OECD), Pascal Saint-Amand, inviting Montenegro to start the procedure for signing the aforementioned multilateral contract. According to the Government, the Ministry of Finance will initiate the procedure for signing the contract in accordance with the procedure for signing international contracts," said the Ministry.
From the countries of the former Yugoslavia, the agreement was signed by Serbia, Croatia and Slovenia. The OECD said that seven more countries have shown interest in signing the agreement.
The innovative multilateral convention includes a series of measures to update the existing network of bilateral tax treaties and reduce opportunities for tax avoidance by multinational companies. The new convention will also strengthen dispute settlement provisions, including binding arbitration, thereby reducing double taxation and increasing tax certainty.
The new convention, which is the first multilateral treaty of its kind, enables the transposition of results from the OECD / G20 BEPS (Base Erosion and Profit Shifting) project into their existing networks of bilateral tax treaties. It was developed through inclusive negotiations involving more than 100 countries and jurisdictions.
Countries lose up to 240 billion a year on "profit shifting".
The adoption of the Multilateral Agreement in accordance with the OECD/G20 BEPS Action Plan introduces new rules in the matter of international taxation. The aforementioned refers to the prevention of tax planning that exploits loopholes and inconsistencies in tax regulations, to reduce the tax base or "artificially" shift profits to countries with low or non-existent tax jurisdiction - in which there is no economic activity at all or on a small scale.
The plan represents the most significant change in the matter of cross-border taxation in the last few decades and rightly attracts the attention of all actors in the process. The plan implies coordinated international cooperation in the fight against abuse, which is extremely important for taking unique positions on the international level when it comes to taxation of business transactions abroad.
The OECD announced that revenue losses due to base erosion and profit shifting (BEPS) are conservatively estimated at 100 to 240 billion dollars per year, or 4-10 percent of corporate tax revenues.
All interested countries were recommended to incorporate solutions from the BEPS action plan into their national tax legislation in order to prevent tax evasion.
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