Strategizing Multinational Tax Risks

The EU Parliament’s resolutions were passed by a vote of 508 to 108, with 85 abstentions.  The proposals call for mandatory country-by-country (CbC) reporting, a common consolidated corporate tax base (CCCTB), defined tax terms and transparency / exchange of tax rulings.  A summary press release and the full report are provided for reference:

http://www.europarl.europa.eu/news/en/news-room/content/20151120IPR03607/html/Parliament-calls-for-corporate-tax-makeover

http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+TA+P8-TA-2015-0408+0+DOC+XML+V0//EN&language=EN

Key points:

• Welcomes the EU Parent-Subsidiary Directive amendments, effective at year-end 2015, for a general anti-abuse rule and hybrid mismatches.
• EU Commission has breached its obligations under Article 108 of the Lisbon Treaty by not launching state aid investigations previously.
• EU Member States should respect the principle of profits taxation where they are generated.
• Promote good practices on transfer pricing and the pricing of loans and finance fees in intra-group transactions.
• Commission to further investigate restrictions of deductions for intercompany royalty payments (i.e. counter profit shifting).
• All rulings that have an impact on other Member States to be presented in the CbC report, and shared with the Commission and tax administrations.  Rulings to be publicly disclosed in accordance with confidentiality requirements.
• Mandatory CCCTB, with a deadline for the consolidation element and without any further impact assessments.
• Develop measures to tackle cross-border VAT fraud.
• Reform of the Code of Conduct on business taxation.
• New State Aid guidelines by mid-2017.
• EU to be a global leader in tax transparency.
• More extensive CbC report, with intra-group transactions.
• Accelerate European Tax Identification Number project.
• Aggressive tax planning is incompatible with Corporate Social Responsibility (CSR).
• Outgoing financial flows from EU are taxed at least once (i.e. withholding tax).
• Transition period for developing countries to align with Global Standard on Automatic Information Exchange.

This report is compelling, far-reaching and a resource that will be used worldwide, as most non-EU countries will attempt to follow the ever-increasing EU intensity and propensity for changes in the international tax arena.  Thereby, it is a must read and a learning tool for non-tax executives in multinational organisations, as well as tax advisors, tax administrations and other interested parties.