EY’s Global Tax Alert highlights the heightened uncertainty around the proposed Business Activity Tax (BAT) by the House and interested parties.
The BAT is a revenue raising proposal, thus the revenues from this plan would help to move a bill towards passage via the political complexities and processes required. It is very important to monitor, as the death of this proposal would mean deriving that lost revenue from another initiative (i.e. raising the tax rate, etc.).
The Court of Justice of the European Union (CJEU) has struck down the controversial “fairness tax” of Belgium, based upon violations of the Parent-Subsidiary Directive and the freedom of establishment.
Taxpayers who have paid this tax should file a claim for refund, and all taxpayers should be aware of any similar “fairness” provision that unfairly discriminates taxpayers based on enacted EU legislation.
EY’s Global Tax Alert provides additional details.
President Trump has announced his simplistic intentions re: tax reform, and the timing is critical although lacking in substantive detail.
Apart from a lower rate (still undecided what that will be), the notion of territoriality is reinforced, in addition to the one-time tax on foreign earnings. The one-time tax is an important part of any legislation, as it will be used to drive the necessary revenues, apart from other provisions, for ultimate passage.
Most importantly, there is a renewed effort by the legislators to undertake discussions with business leaders to better understand the complexity of new legislation and its overall impact on US and global trade. The proposed import / export actions have reinforced a necessity to understand the widespread impact on different industries and the future economic growth limitations.
Realizing there are many moving parts now on Capitol Hill, it is imperative to call attention to those actions that will impact, positively or negatively, a corporation’s future ability to drive economic growth and new jobs.
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.
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.