Strategizing International Tax Best Practices – by Keith Brockman

Archive for the ‘OECD / UN’ Category

TEI comments: BEPS IP & VAT Guidelines

TEI submitted comments on the Modified Nexus Approach for IP (BEPS Action 5) and International VAT/GST Guidelines.  Links to the submissions are provided for reference:

Click to access TEI%20Comments%20-%20BEPS%20Action%205%20Harmful%20Tax%20Practices%20-%20FINAL%20to%20OECD%2019%20February%202015.pdf

Click to access OECD%20VAT%20Guidelines%20-%20B2C%20Practical%20Application%20-%20TEI%20Comments%20-%20FINAL.pdf

Summary: IP, BEPS Action 5:

  • Accelerated  comment process will likely lead to suboptimal results.
  • The singular entity approach to benefit from the IP regime is problematic from a potential restructuring necessity and poses deviations from the arm’s length principle.
  • R&D and patents have been expressly stated as benefitting from the IP regime, whereas other activities are not yet mentioned.
  • Limiting the preferential regime to strictly patents, vs. innovative software, etc., represents a myopic approach.
  • The 2021 expiration date for existing regimes seems too short-sighted for patents that may last 20 years.

Summary: International VAT/GST Guidelines

  • Unilateral implementation of such guidelines erodes the neutrality principle, leading to double taxation or double non-taxation.
  • Recommendations should align with the OECD discussions for a reverse charge mechanism in B2B scenarios.
  • Supplier based documentation requirements should be practical and simple.
  • The statement that a VAT/GST registration does not create PE should be moved from a footnote to the body of the document for clarity.
  • The lack of consistency in application of transfer pricing adjustments for VAT/GST will provide increased risk of double taxation.
  • Final rules that are clear and uniformly interpreted should be implemented via simple, consistent, flexible and proportional guidelines.

TEI’s comments for these two critical topics convey practical and thoughtful considerations for change prior to final implementation.  They should thereby be reviewed to better understand the global context and potential consequences for these actions.

 

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OECD / UN

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BEPS: Asset manager focus

EY’s Global Tax Alert focuses on BEPS considerations for asset managers,  This is a very timely and informative aspect of BEPS, as it will certainly have an impact on asset managers worldwide.  Early review and consideration of three significant proposals is recommended to ensure timely planning and relevant documentation.  The proposals include county-by-country reporting (Action 13), treaty abuse (Action 6), and hybrid mismatch arrangements (Action 2).

Click to access 2015G_CM5228_BEPS%20considerations%20for%20asset%20managers.pdf

The Alert is informative for all MNE’s and fund managers, ensuring the BEPS review umbrella appropriately encompasses direct and indirect aspects of operations, including the investment fund industry.

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OECD / UN

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BEPS: APAC Network update

The Asia-Pacific Regional Network on BEPS discussed the impact of BEPS on their region in its meeting on 12-13 February 2015, with over 50 senior tax officials from 21 jurisdictions and international organisations attending.  Attendees included the Asian Development Bank, IMF, US Agency for International Development (USAID) and the Study Group on Asian Tax Administration and Research (SGATAR).

Twelve direct participants in the BEPS project consist of Australia, Japan, Korea, New Zealand, China, India, Indonesia, Malaysia, Singapore, Bangladesh, Philippines and Vietnam.  The discussion summary is included for reference:

Click to access beps-regional-network-asia-co-chairs-summary-of-discussions.pdf

Discussion Summary:

  • Participants supported the cooperative and inclusive process for developing countries to support the OECD/G20 strategy.
  • All stakeholders, including MNE’s, should be engaged to address BEPS solutions.
  • Recognition of uncoordinated regional efforts addressing interest deductibility (Action 4), PE (Action 7), transfer pricing issues (Actions 8-10), and transfer pricing documentation (Action 13).
  • The introduction of toolkits, further support, and assistance is welcomed, including their participation in the OECD dialogue process.
  • Further guidelines on dispute resolution were requested by business and NGO representatives.
  • Future involvement will focus on additional engagement, participation and collaboration with various partners.
  • Next meeting is scheduled for 16-18 March 2015.

As the BEPS project proceeds to finalize its deliverables this year, the input of this organization and other interested parties will provide a limited window of opportunity to share views and practical suggestions to ensure consistency for taxpayers and tax administrations regionally and globally.  Accordingly, monitoring (including active participation in) future developments will be critical to form Best Practices for taxpayers and tax administrations.

Most importantly, it will be critical to ensure regional participants do not execute unitary legislation prior to release of the final OECD guidelines to ensure the BEPS process is successful.  The timing of such initiatives should also be a priority for the Asia-Pacific Network, its participants and other countries around the world. 

Related posts:

  1. OECD Tax Inspectors Without Borders (TIWB) and Toolkit: 30 January 2015
  2. Creation of task force and prior meeting of SGATAR: 1 December 2014
  3. OECD BEPS Strategy for Developing Countries: 13 November 2014

 

 

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OECD / UN

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BEPS update: Actions 5 & 15

The OECD has updates available with respect to Action 5 (Intangibles), Action 15 (Multilateral instrument) and Action 13 (Country-by-Country reporting – refer to prior post of 6 Feb. 2015).  Links are provided for the OECD’s statement of intent addressing these three actions in particular.

http://www.oecd.org/tax/first-steps-towards-implementation-of-oecd-g20-efforts-against-tax-avoidance-by-multinationals.htm

Click to access beps-action-5-agreement-on-modified-nexus-approach-for-ip-regimes.pdf

Click to access beps-action-15-mandate-for-development-of-multilateral-instrument.pdf

Summary – Action 5 (Intangibles):

  • The Modified Nexus Approach is generally accepted.
  • 30% uplift of qualifying expenses re: outsourcing and acquisition costs in addition to significant R&D activities of taxpayer.
  • Existing regimes will be closed by 30 June 2016 to new entrants; legislation to be effected in 2015.
  • Grandfather rules for existing regimes may extend 5 years (i.e. 30 June 2021).
  • Methodology of tracking / tracing R&D expenditures will be developed.
  • Guidance to be issued re: definitions; patents qualify, whereas trademarks do not qualify.

Summary – Action 15 (Multilateral Instrument):

  • The intent to develop a multilateral instrument to implement specific BEPS Actions is still desirable and feasible.
  • The instrument will be designed to implement treaty-related measures of the BEPS Project.
  • Several BEPS Action items that are known to be inclusive are Action 2 (Hybrid entities), Action 6 (Treaty abuse), Action 7 (PE) and Action 14 (Dispute resolution).  Other Action items may be included after final guidance is developed, including a mechanism to exchange information for country-by-country reporting.
  • Each Action item may be optional, or there may be a minimum number of Actions that a country will have to execute.
  • The instrument is not compulsory and is open to all jurisdictions.
  • Development of the instrument will be accomplished by an ad-hoc group that is under the aegis of the OECD and G20.
  • Outputs are expected Sept. 2015, with final development of the instrument concluded by 31 Dec. 2016.

The timing of 31 Dec. 2016 will be critical to monitor, as many countries may decide to develop unilateral legislation prior to this date.  It is hopeful that tax administrations will not try to (informally) implement BEPS guidelines prior to the time that effective legislation is executed.

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OECD / UN

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TEI’s comments: BEPS Actions

TEI has provided comments in response to several OECD BEPS Actions, linked herein for reference.

Action 10:Profit Splits-Key comments:

  • Profit split methodologies should be limited to scenarios where there is not reliable arm’s length pricing.
  • Simple examples provided do not provide a comprehensive basis for detailed replies and consideration.
  • A profit split approach may be subject to abuse by tax authorities.
  • Hindsight application of transfer pricing methodologies should only be used in exceptional circumstances.

Click to access TEI%20Comments%20BEPS%20Action%2010%20-%20Profit%20Splits%20-%20FINAL%20to%20OECD%206%20February%202015.pdf

Actions 8-10: TP Guidelines

  • Transfer pricing analyses discussed in the proposal would require significant resources for MNE’s and tax authorities.
  • The possible merging of the approaches of attributing profits for Article 7 (PE) and Article 9 (Associated Enterprises) should be clarified.
  • The imposition of “insufficient transfer pricing documentation” penalties should be abandoned/relaxed by tax authorities for a reasonable period of time after implementation of the new guidelines.
  • Additional compliance burdens elicit increased complexity and confusion.

Click to access TEI%20Comments%20BEPS%20Actions%208-10%20-%20Risk%20and%20Recharacterisation%20FINAL%20to%20OECD%206%20February%202015.pdf

Action 4: Interest

  • The proposal represents a shift away from the arm’s length principle, introducing difficult and impractical problems to resolve.
  • Capitalisation factors include many considerations other than tax.
  • Double tax consequences are more likely, as MNE’s will not be able to easily rearrange financing structures worldwide.
  • The withholding tax impacts should be clarified for foreign tax credit and related calculations.
  • MNE’s with a higher effective tax rate, and thus less prone to base erosion or profit shifting arrangements, should be excluded.
  • The concept of global limitation calculations, and interest sharing, needs to be further discussed to determine efficient audit guidance.

Click to access TEI%20Comments%20BEPS%20Action%204%20-%20Interest%20Deductions%20-%20FINAL%20to%20OECD%203%20February%202015.pdf

Action 10: Commodities

  • Right to use publicly available quoted exchange prices as a comparable is a welcome proposal.
  • Discussion of other issues, including pricing, pricing date, and documentation should be further considered and clarified.

Click to access TEI%20Comments%20BEPS%20Action%2010%20-%20Commodity%20Transactions%20-%20FINAL%20to%20OECD%203%20February%202015.pdf

 

TEI’s comments are always informative, practical and highlight issues that are both useful as well as problematic.  Therefore, these comments provide an excellent forum, along with comments from other interested parties, for further consideration prior to drafting final guidance.

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OECD / UN

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BEPS Action 13: CbC reporting guidance

The OECD has provided additional information re: the timeline and mechanism for providing the Country-by-Country (CbC) template.  A link to the document is included herein:

Click to access beps-action-13-guidance-implementation-tp-documentation-cbc-reporting.pdf

Summary of key points:

  • Master file and local file should be implemented by, and filed directly with, the relevant jurisdiction
  • Information to be provided for fiscal years beginning on or after 1/1/2016
  • Information to be filed by ultimate parent by 31 Dec. 2017 in their jurisdiction of residence
  • Exemption for MNE groups with annual consolidated revenues less than EUR 750M in immediately preceding year
  • The countries participating in the OECD / G20 BEPS Project agree that they will not require filing of a CbC report based on the new template for fiscal years beginning prior to 1/1/2016
  • Secondary reporting mechanism re: sharing of information between jurisdictions
  • Monitoring mechanism coupled with a 2020 review
  • The participating countries agree to:
    • Confidentiality provisions
    • Consistency (i.e. no additions or changes to template requirements)
    • Appropriate Use: No income allocation formula adjustments; CbC report adjustments are to be conceded by their Competent Authority

The guidelines are fairly short and concise, and it will be important to monitor laws in the parent jurisdiction for details of the respective filing process.  Additionally, it is even more important to watch countries that are NOT participating in the BEPS Project for different timelines, information and processes to be followed for customized CbC templates that would create additional complexity and global inconsistency.

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OECD / UN, Transfer Pricing

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OECD Tax Inspectors Without Borders (TIWB): Update

The OECD’s TIWB program’s trial phase ended in December, 2014, with a launch scheduled in 2015, subsequent to a review process.  (Refer to the 9 June, 2013 post).

The TIWB’s objective is to enable sharing of tax audit knowledge and skills with tax administrators in developing countries through a targeted, real-time “learning by doing” approach.  The program encompasses transfer pricing, thin capitalization, APA’s, anti-avoidance rules, pre-audit risk / case selection, and VAT, although customs is excluded. Links to the program summary and the Toolkit (published in Nov. 2014) are included for reference:

http://www.oecd.org/tax/taxinspectors.htm

Click to access tax-inspectors-without-borders-toolkit.pdf

The Toolkit details the role of a TIWB Secretariat as a Facilitator, and roles and responsibilities of the parties to this shared arrangement.  Eligible individuals must meet a 5-year minimum audit experience requirement, and they can be currently working or recently retired.  Most importantly, the Toolkit addresses legal liability considerations and confidentiality restrictions during, and after, their assistance. T

his initiative should be monitored closely, as there do not seem to be prescribed transparency rules for the company under audit.  Therefore, a question for the opening audit could be an inquiry as to the tax administration’s expectations for outside expert assistance from TIWB.  Additionally, an expert with limited experience, coupled with the lack of familiarity with subjective jurisdictional rules for GAAR assessments, for example, may place additional burdens on an expert and the host country in assessing inherently complex rules.

This initiative has a strong likelihood for implementation that further reinforces the OECD’s intent to provide additional guidance for developing countries as complex BEPS Actions are implemented on a domestic level.  Accordingly, it is imperative to review the Toolkit for current familiarity with this program and follow its developments in the near future.

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OECD / UN

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EU TP Forum: Ready, set, go

The European Commission has formally established the EU Joint Transfer Pricing Forum expert group, based on the press release of 26/01/2015.  The Forum will be composed of transfer pricing experts that will discuss TP problems, advise the Commission on TP issues and assist the Commission in finding practical solutions.

Members will consist of Member States’ tax administrations and 18 organisations, for which guidelines for application are also attached for reference.  The names of the organizations will be published.  Rules for observer status are also set forth.  The Commission will publish all relevant documents such as agendas, minutes and participants’ submissions.  The Decision is applicable until 31 March 2019.

The definition of organisations is stated as: “Companies, associations, NGO’s, trade unions, universities, research institutes, Union agencies, Union bodies and international organisations.”  Application are to be submitted by 25 February 2015.

Click to access decision_c(2015)247_en.pdf

Click to access call_applications_2015_en.pdf

Further work on the work of the Forum may be accessed at:

http://ec.europa.eu/taxation_customs/taxation/company_tax/transfer_pricing/forum/index_en.htm

This development should be closely followed, notably in the member selection, recommendations provided, and TP solutions proposed.

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OECD / UN, Transfer Pricing

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Inconsistent (tax) terminology adds to confusion

The inconsistent use of (tax) terminology in drafting / enacting legislation and communicating issues re: perceived tax abuse, developing specific/targeted/general anti-avoidance rules (SAAR, TAAR, GAAR), anti-abuse rules, etc. promotes subjectivity, uncertainty, and misguided perceptions in trying to understand complex legal and technical international tax laws and regulations.

The recently drafted anti-abuse rule in the EU Parent-Subsidiary Directive (attached link for reference) is designed as a minimum standard to be adopted by EU Member States.  Article 1, paragraph 4 of the Directive states “This Directive shall not preclude the application of domestic or agreement-based provisions required for the prevention of tax evasion, tax fraud or abuse.”  This language should be compared to other tax legislation that introduce additional subjectivity and confusion with undefined and misunderstood terminology.

http://register.consilium.europa.eu/doc/srv?l=EN&f=ST%2016633%202014%20INIT

Subjective terminology that accompanies undefined verbiage as a basis for tax laws and regulations, such as anti-avoidance / abuse rules, further complicates comprehension, application, interpretation, and assessment of complex international tax rules.

The phrases “tax evasion” and “tax fraud” clearly set forth bright legal lines for definition and enforcement, whereas inherently subjective phrases of “tax avoidance,” “aggressive tax planning,” “intent of Parliament”, “tax abuse,” and similar terminology result in additional uncertainty for deciphering the true intent of significant tax legislation.

It would be beneficial to recognize the inherent inconsistencies of terminology applied in tax laws and regulations, and commence inclusion of verbiage and definitions that provide clarity promoting consistent application, implementation and enforcement of international tax guidelines.

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OECD / UN, Transfer Pricing

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CbC reporting: Spain is 2nd

The Spanish Treasury has announced that a Country-by-Country (CbC) reporting obligation will be included in the new Regulations, expected to be adopted in the first half of 2015 and effective on 1/1/2016.  This announcement follows an earlier decision by the UK to adopt CbC reporting for UK headquartered companies, also effective as of 2016 (refer to 12 December 2014 post).

The Spanish CbC reporting template is expected to mirror the OECD BEPS proposal to ensure alignment.

Best Practice notes:

  1. Timing: The OECD Guidelines are expected to include CbC reporting for the 2016 tax year, with one year provided to provide such documentation due to differing tax years of subsidiaries, timing of statutory reports, etc. upon which the relevant information is based.  The UK and Spanish CbC reporting are also focusing on 2016, although no date has been yet prescribed for providing the documentation to the tax authorities.  The dates legislated into law by the countries may precede the OECD suggested timeline.
  2. Coordination of CbC and TP documentation: If there are perceptive gaps or issues that are to further explained and referenced in the transfer pricing documentation, the date for providing contemporaneous TP documentation may be earlier than the CbC reporting date.  Therefore, planning should start now to take into consideration that not enough time may be available in 2017 to coordinate both sets of reports effectively.
  3. CbC definitions:  Ideally the UK, Spain and other countries adopting CbC will use consistent definitions for the items to be reported for global consistency.  To the extent there are different definitions, additional complexity, time and cost will be incurred by MNE’s.
  4. Items to report for CbC: At an early stage, it appears that the UK and Spain are adopting identical items for reporting purposes.  However, it is expected that some countries will use the OECD Guidelines as a base upon which other “wish list” items are to be included, resulting in further complexity.
  5. Sharing of CbC information: The first countries to adopt CbC reporting may share such information as a means of transparency with other tax authorities.  Therefore, it is expected that all countries may have access to this information very quickly irrespective of their domestic laws.

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OECD / UN, Transfer Pricing

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TEI’s comments: OECD BEPS Actions 10 and 14

Tax Executives Institute, Inc. (TEI) recently published comments re: OECD BEPS Action 10, addressing Low Value-Adding Intra-Group Services, and Action 14 re: Dispute Resolution Mechanisms.  The comments elicit practical considerations, including worldwide consistency, in their well written and reasoned responses.  Although many individuals/organizations have provided comments, TEI’s submissions merit required reading and thoughtful consideration. Links to TEI’s comments are included for reference:

Click to access TEI%20Comments%20BEPS%20Action%2010%20-%20Low%20Value%20Added%20Services%20-%20FINAL%20to%20OECD%2013%20January%202015.pdf

Click to access TEI%20Comments%20BEPS%20Action%2014%20-%20Dispute%20Resolution%20-%20FINAL%20to%20OECD%2015%20January%202015.pdf

Key comments re: Action 10, Low Value-Adding Services

  • Non-global implementation will diminish the intended value of this initiative.
  • A “rebuttable presumption” should replace the “benefits test” for low value -added services.
  • Exclusion of corporate senior management’s services is complex; it may be easier to include such services.
  • A mark-up % of 0-5% should replace 2-5% for flexibility and reflecting cost contribution arrangements.
  • Any percentage within the safe harbour range should be allowable.
  • Guidance should be issued re: coordination of Action 10 and Action 13 re: transfer pricing documentation.
  • Reference to the OECD’s previous work on safe harbours has been omitted, for no stated reason.
  • The safe harbour should be available if the taxpayer’s method is different in another jurisdiction (i.e. APA’s, non-OECD alignment).

Key comments re: Action 14, Dispute Resolution Mechanisms

  • Published MAP guidelines and procedures are welcome, although redacted settlements would also reveal legal basis for outcomes,  and may be used as precedent for taxpayers.
  • KPI’s should be established.
  • Monitoring the MAP process is an excellent proposal suggested in the report.
  • A global dispute resolution mechanism and mandatory binding arbitration should be developed, with arbitration available as a pre-MAP appeal avenue.
  • Deadlines for Competent Authority (CA) requests should be in place, along with penalties for CA if they do not respond timely.
  • Maintaining confidentiality is critical and should be a primary focus, especially for countries initially adopting this process.
  • Transparency of independency for Competent Authorities would improve confidence in the process.
  • Taxpayers should participate in face-to-face meetings to facilitate the process, and a simplified process should initiate MAP assistance.
  • Precluding taxpayers from using MAP, directly or indirectly giving up their rights, is not acceptable.
  • Binding arbitration provisions and/or use of a domestic or treaty-based anti-abuse rule should not preclude MAP.
  • Tax, interest and penalties should be suspended during the MAP process.

The comments on Action 14 are especially critical, as dispute resolution will be a critical factor in ensuring that the BEPS guidelines legislated into law will have consistent, fair and transparent processes to resolve disputes timely and effectively.

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OECD / UN

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Comments re: OECD BEPS 14: Dispute Resolutions

The OECD has released comments received in response to BEPS Action Item 14: Make Dispute Resolutions More Effective. These comments are valuable in understanding these important mechanisms that could minimize potential double taxation and increase certainty in a timely manner, as well as comprehend its significant impact on other current BEPS Guidelines that are being drafted such as Action Item 6: Treaty Abuse re: subjective tests being proposed such as the Principal Purpose Test (PPT).

Unfortunately, mandatory arbitration, as well as consistent consideration and application of the MAP procedure, are ideals that will not be realized, due in part to countries not wanting to give up their control and concept of sovereignty.  As the BEPS guidelines, and unilateral country legislative actions, become more complex and subjective, the dispute resolution process increases its vital importance exponentially.  Therefore, it is in everyone’s interest to make these mechanisms work efficiently and consistently in a transparent environment.

The link to the respective comments are included for reference:

Click to access public-comments-action-14-make-dispute-resolution-mechanisms-more-effective.pdf

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OECD / UN

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TEI Comments: BEPS Item 6 – Preventing Treaty Abuse

Tax Executives Institute, Inc. (TEI) has issued follow-up comments in response to the OECD public discussion draft on 21 November 2014, in addition to its prior comments on 8 April 2014 on the first discussion draft.  The latest comments are referenced herein:

Click to access TEI%20Comments%20-%20BEPS%20Action%206%20-%20Follow%20Up%20Work%20on%20Treaty%20Abuse%20-%20FINAL%20to%20OECD%208%20January%202015.pdf

Key observations:

  • The Principal Purpose test remains highly subjective and susceptible to unpredictable interpretations, therefore TEI opposes including this test in the OECD model treaty.
  • Jurisdictions should adopt an administrative appeal process if the Principal Purpose test is asserted.
  • A treaty incorporating a Limitation on Benefits provision (LOB provision) and a Principal Purpose test may deny benefits if the LOB test is satisfied and the benefit is denied under the Principal Purpose test.  The LOB provision should be the primary (objective) tool rather than one part of a two-part treaty abuse test.
  • The Principal Purpose test may result in benefits not recorded on audited financial statements due to its uncertainty.
  • Transition relief and prospective arrangements should be included in the final guidelines.

TEI’s comments should be reviewed to understand the myriad issues proposed to combat treaty abuse.  Additional uncertainty, accompanied by appeals of such assessments, will be the likely result of the proposal as currently drafted.

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OECD / UN

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BEPS Action 7 / PE: TEI’s comments

Tax Executives Institute, Inc. (TEI) has provided comments in response to OECD’s BEPS Action 7: Preventing the Artificial Avoidance of PE Status.

Click to access TEI%20Comments%20-%20OECD%20BEPS%20Action%207%20PE%20-%20FINAL%20to%20OECD%2023%20December%202014.pdf

Key observations:

  • Changes to the definition of a Permanent Establishment (PE) are more welcome in the Model Convention, as recommended, rather than modifying the official commentary.
  • Continued focus on physical presence in the general definition of a PE is commended.
  • “The Discussion Draft generally views commissionaires as structured “primarily” to permit MNEs to erode the tax base of the State of sale.” However, there is no mention of the legitimate arrangements for which they are used.
  • Four amendments are proposed, each of which would likely eliminate the commissionnaire arrangement and increase uncertainty.
  • The new paragraph 6, broadening the definition of an independent agent, is vague and problematic.  This change may result in a subsidiary being a dependent agent of the parent in a limited risk distributor situation, resulting in PE of the parent.
  • The proposed anti-fragmentation rules for a PE exception are subjective and increase uncertainty.
  • The Authorized OECD Approach (AOA) for determining a PE’s profits are complex and uncertain.
  • There are no transition periods or grandfathering provisions for implementation of the new PE definition.

TEI’s commentary is well written and poses practical arguments that should be considered by the OECD.  Accordingly, it is a document that should be required reading for all tax practitioners involved in transfer pricing.  The proposed changes will also affect other aspects of transfer pricing and BEPS Actions that will be finalized this year.

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OECD / UN, PE, Transfer Pricing

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Denmark: (Super) GAAR?

The General Anti-Avoidance Rule (GAAR) has received a status of prominence during 2014, and continues its subjective and complex override provisions in domestic law that are interwoven with treaty provisions.

Denmark has proposed a (Super) GAAR, trumping the EU Parent-Subsidiary Directive, EU Interest-Royalty Directive, EU Merger Directive and Danish double tax treaties.  Notwithstanding its current status as a “proposal,” Denmark’s intent is clearly shown to provide an umbrella rule, evidently overriding the respective treaties, providing that a “main purpose” rule which achieves tax advantages would be used to disallow respective tax benefits of the transaction(s).  The proposed rule would be effective by 01 May, 2015.

PwC’s Insight has provided a brief summary of the proposal:

Click to access pwc-denmark-introduce-gaar-double-tax-treaties-directives.pdf

GAAR continues to be “the elephant in the room,” highly visible although the rules and appeal avenues are distinct and arbitrary for every country.  Some countries have GAAR rules, along with specific / targeted anti-avoidance rules (SAAR / TAAR).  Thereby, tax uncertainty and the risk of double taxation increases, dispute resolution (if available) avenues are further stressed, and arbitration measures may not be available.

With respect to arbitration, it should be adopted by every country to achieve mutuality with taxpayers, however some countries have expressly stated that they do not want to give up their control / sovereignty.  Unfortunately, OECD has not aggressively pursued this remedy for multilateral agreement.

Category:

OECD / UN, Tax Risk Management, Transfer Pricing

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