As the Mandatory Disclosure Rules of DAC6 are still being interpreted by Member States, practitioners and advisors, the European Commission has adopted a new package of initiatives, including
- 25-step Action Plan to be implemented between now and 2024, addressing a fair and simple tax system with a focus on technology,
- DAC7, exchange of information by sellers on digital platforms, and
- Tax Good Governance in the EU and beyond, including a review of the EU list of non-cooperative jurisdictions
The tax package is well worth reading, especially the introduction of DAC7, which provides context for the manner in which tax rules and parliamentary procedures must be met prior to formal adoption.
EY’s Tax Alert provides a detailed summary, including links to the initiatives.
My prior post of 30 May 2015 revealed that the European Commission would be developing a new Action Plan, the contents of which are hereby revealed.
The objectives of the new Action Plan are:
- Re-establish the link between taxation and where economic activity takes place
- Ensuring that Member States can correctly value corporate activity in their jurisdiction
- Creating a competitive and growth-friendly EU tax environment
- Protecting the Single Market and securing a strong EU approach to external corporate tax issues, including BEPS measures, to deal with non-cooperative tax jurisdictions and to increase tax transparency
The new Action Plan is provided for reference:
Click to access com_2015_302_en.pdf
5 Key Action Areas:
- Mandatory Common Consolidated Corporate Tax Base (CCCTB), with the consolidation component included as a second step.
- Taxation of profits where they are generated (“However, it is clear that the current transfer pricing system no longer works effectively in the modern economy.”)
- Enhance the EU’s tax environment via cross-border loss offset and improving double taxation dispute resolution mechanisms.
- Increased tax transparency via an EU-wide list of third country non-cooperative tax jurisdictions and assessing whether additional disclosure obligations of certain tax information should be introduced.
- Providing EU Coordination Tools to improve Member States’ tax audit coordination and reforming the Code of Conduct for Business Taxation and the Platform on Tax Good Governance.
The European Commission’s Action Plan clearly reveals a large step away from the traditional arm’s-length transfer pricing principle and toward an economic activity based source of taxation. This clear divergence, with the OECD and established legislation in most countries, sets the stage for a new evolution in transfer pricing and a hybrid of different approaches by various jurisdictions in the next several years.
Accordingly, the Action Plan is required reading to appreciate short and long-term objectives of the European Commission to unify the Member States.
KPMG’s Transfer Pricing Alert highlights current transfer pricing audits in Vietnam based on risk assessments, including key observations and insights.
Following the Action Plan on Transfer Pricing Management (the Action Plan) announced by the Ministry of Finance under Decision 1250/QD-BTC dated and effective 21 May 2012, the General Department of Taxation (GDT) has rolled out transfer pricing audits across a number of provinces in the context of challenging 2013 tax revenue collection.
Key observations include the preference of transfer pricing methods, secret comparables, irrelevance of commercial/economic factors and arbitrary transfer pricing adjustments.
Audits in Vietnam and similar markets should be monitored closely, noting appeal and arbitration opportunities that may mitigate double taxation. Refer to my prior post of 2 December 2013 summarizing Vietnam’s proposed anti-treaty shopping rules to deny tax treaty benefits.