Strategizing International Tax Best Practices – by Keith Brockman

Archive for March, 2017

VAT: GCC/UAE/India’s new rules

As UAE’s (and some other GCC States) VAT regime, effective 1/1/2018, becomes closer, it is clear that  multinationals (MNEs) need to prepare now re: VAT assessments, information required, system review, etc. to plan effectively for this new indirect tax.

Additionally, India’s new scheme also is in effect starting this year, and a similar exercise should be conducted re: operations conducted in India.

As VAT is an indirect tax, all MNE’s should ensure such local filings are coordinated with regional / global compliance governance controls.

EY’s Global Tax Alert provides additional details re: the GCC’s upcoming rules.

http://www.ey.com/Publication/vwLUAssets/UAE_Ministry_of_Finance_presents_key_information_in_relation_to_proposed_VAT_regime/$FILE/2017G_01345-171Gbl_Indirect_UAE%20MoF%20presents%20key%20information%20in%20relation%20to%20proposed%20VAT%20regime.pdf

US int’l developments: CbC exchange

EY’s Global Tax Alert, referenced herein, provides a summary of the latest US international tax developments, including the exchange of BEPS related information.

US recently finalized two model competent authority agreements that will be used for exchanging country-by-country (CbC) reports. One model will apply to information exchanged under US tax treaties, the other will be used with US tax information exchange agreements (TIEAs). A tax treaty or TIEA serves as the legal basis for the exchange of tax information in the CbC reports.

Most importantly, the US has two requirements for countries exchanging CbC reports under OECD’s Action 13: (1) a legal instrument authorizing the exchange, and (2) adequate data security.  With respect to the security prerequisite, this presents uncertainty as to which countries are not considered to have the requisite security.  However, will this “list” be communicated in advance so MNE’s are in compliance with that country’s laws requiring the submission of CbC data?  This should be a forethought, rather than an afterthought, to the process.

http://www.ey.com/Publication/vwLUAssets/Report_on_recent_US_international_tax_developments_-_17_March_2017/$FILE/2017G_01247-171Gbl_Report%20on%20recent%20US%20international%20tax%20developments%20-%2017%20March%202017.pdf

PE & Global Mobility partner

As the subject of permanent establishment (PE) becomes more controversial amid the ever-changing rules, multinationals (MNEs) should have a proactive partnership relationship with their global mobility service provider, whether in-sourced or outsourced.

Global mobility generally reports through the HR function, thus a silo approach may result without the proactive ability of the tax function to create a cohesive team.  The concepts of legal employer, economic employer, intercompany allocations, foreign reporting relationships, contractual arrangements, intercompany agreements, etc. all need to be vetted and challenged for every assignment that may have adverse consequences for the employee and/or the company.

Countries are taking a more aggressive PE approach, thus a standard assignment template and / or agreement may not work in today’s post-BEPS world.  India, for example, has very specific rules that dictate a PE without special attention to the control and payment arrangements of the assignment.  Assessments may take years to resolve requiring additional cost and time, including the necessity of external advisors.

The organizational structure of significant functions that may cause consequences for a MNE’s tax organization should be reviewed, possibly adding dotted line relationships for global mobility, customs, external communications, etc.  At the very least, these related functions should be discussing these potential issues on a regular basis, while forming a mini-university for learning.  

As the subject suggests, the organizational structure and reporting relationships should not follow the same-as-last-year approach due to the BEPS evolution around the world.  

 

 

GCC VAT: A reality

The long -awaited VAT has become a reality in the GCC, effective 1/1/2018.

This provision will require advance (systems) implementation and training, especially for companies in the region not familiar with VAT reporting.  Note the UAE and other GCC countries have nil, or minimal rates of corporate tax and this indirect tax will provide a local economic stimulus without creating additional complexities of corporate tax reforms.

This reform is not unexpected, although now the execution phase is very important to provide a seamless transition for reporting and collection.  

EY’s Global Tax Alert provides additional details of this development.

http://www.ey.com/Publication/vwLUAssets/Preparation_for_GCC_VAT_by_1_January_2018_requires_immediate_action/$FILE/2017G_00900-171Gbl_Indirect_Preparation%20for%20GCC%20VAT%20by%201%20Jan%202018%20requires%20immediate%20action.pdf

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