EY’s Global Tax Alert highlights the indirect tax consequences resulting from final guidance of the BEPS Action Items:
- Interaction of Article 1 (Digital Economy) and Article 7 (PE) may create a wider gap for findings of a indirect tax “fixed establishment” and a direct tax “permanent establishment” (PE), although some countries do not respect such distinction. Thus , business models merit a review for such changes.
- Article 8 (Intangibles) set forth changes in allocation and valuation that may affect customs valuations.
- Actons 8-10 (transfer pricing) may invite additional focus by tax authorities on VAT/GST and customs.
- Action 13 (country-by-country reporting) may invite scrutiny of indirect taxes.
The focus of BEPS has been on direct taxes, while its impact will now be measured for purposes of indirect taxes. Thus, a BEPS review should encompass direct and indirect tax effects, including VAT/GST and customs.