Strategizing Multinational Tax Risks

http://www.pwc.com/gx/en/tax/publications/permanent-establishments.jhtml

PwC has published results from a survey of more than 200 multinationals in Europe and the U.S., focused on Permanent Establishment (PE) challenges and trends.

Survey results include the following:

• 86% cite increased mobility as a significant trend in triggering PE risk.
• Difficulty in monitoring business activities, after PE guidance is provided.
• Do’s and Don’ts provisions are hard to manage.
• Audit readiness checks should be conducted to reduce PE risk.
• Tax authorities are exhibiting more aggressiveness in assertions of PE, primarily focused in Europe.
• Site visits and employee interviews are techniques used more often by tax authorities to identify risks.

My prior posts encompassing PE trends and Best Practices should be reviewed, including 14 April PE Risks and Best Practices, 24 April Global Mobility Alignment, 11 May and 20 May Branch activity risks.

Examples of Best Practices:

• Confirmation of PE awareness and controls annually by CFO’s / Business Leaders, including Branches and emerging markets
• PE template to facilitate audit readiness checks
• PE internal reference guide
• PE workshops with Internal Audit, Global Mobility and Business Leaders discussing examples of PE and addressing adequacy of controls
• Discussion of PE cases in the media with regional and global tax teams to accurately and timely inform business leaders

PE risk is still increasing, thus additional focus should be directed to minimize this risk and integrate controls into the Tax Risk Framework.