Strategizing Multinational Tax Risks

Global mobility will face, directly and indirectly, various challenges resulting from OECD’s BEPS proposals.  PwC’s Insights provide a concise summary of these proposals, included for reference:

Click to access pwc-oecd-final-beps-package-what-does-it-mean-for-global-mobility.pdf

Key points:

• Treaty changes, either bilaterally or via the Multilateral Instrument, will affect key issues and risks, including permanent establishment (PE).
• Unilateral changes, several of which have been enacted, should be reviewed with a focus on global mobility functions.
• The transparency initiative will encourage tax authorities to aggressively pursue PE and treaty based rules.
• What is the impact of the change for PE dependent/independent test.
• Responsibilities of senior executives, sales representatives and regionally based employees will need to be reviewed for the new rules.
• People functions re: controlling risk should receive separate review.
• Intercompany agreements (i.e. legal form) should be compared to practical substance responsibilities to evidence conformity, as analyses will use legal agreements as only a first step to understand the transactions and potential consequences.

Post BEPS, it is imperative that global mobility’s function and responsibilities should be reviewed, from a tax risk awareness perspective as well as internal governance controls.  To the extent that global mobility is not closely collaborated with the tax function, the ways of working and reporting should be reviewed to address this new world of international tax transparency and the emphasis on multinationals paying their fair share of tax, however construed.