As this news has been widely reported, this controversy highlights the need to aggressively govern the activities of significant Branches worldwide. This issue is a reminder in today’s tax environment of the necessity for diligence and governance for Branch operations. The following ideas are presented for review and comment.
- Review all material on your company’s website re: location of sales activity, associates and job postings.
- Review job titles and descriptions for all personnel in Branches worldwide.
- Compare Branch accounts and related disclosures with actual activities on an ongoing basis for consistency.
- Have a Do’s and Don’ts list that is reviewed annually with individuals having market support activities.
- Align with Global Mobility re: assignments/transfers of individuals to Branches with Sales titles and responsibilities.
- Compare actual activities with the legal constraints of a Branch in the relevant jurisdiction.
- Put a plan in place to regularly determine if a Branch is the best legal form of conducting business, vs. subsidiary, etc.
- Conduct annual trainings at significant Branches to ensure the activities align with the legal form of doing business.
- Ensure the concept of PE is well understood by individuals accountable for the Branch operations.
- What job titles are individuals allowed to include on their business cards?
- How do Branch personnel represent themselves to the external trade?
- Is there an objective benchmark (i.e., number of personnel) for Branches that triggers an automatic review?
- Review the relevant Double Tax Treaty safe-harbor PE provisions.
- Reputational risk: Consider how Branch activities impact the Tax ERM framework, and monitoring controls in place.
It will be interesting to track the activities of this controversy and analyze how to further minimize risks for Branch activities.