The Federal Tax Administration (FTA)has collaborated with the Swiss Tax Conference, EXPERT-suisse and an academic partner to set forth written principles and rules of conduct. These rules are focused upon employees of tax administrations, companies and tax professionals.
The format includes the following highlights:
General principles of conduct
Tax return process
Advance tax ruling
A Code of Conduct is an importance governance tool for tax administrations and multinationals. It represents a baseline of understanding to achieve a fair, efficient and transparent process for all parties. This document would be an excellent opening item of discussion for any audit.
The link for reference is estv.admin.ch, FTA subtag, with tabs on the upper right for different languages.
The OECE Forum on Tax Administration (FTA) has published a handbook explaining participation in the international compliance assurance program (ICAP).
This objective was started in 2018, and is now taking more substance. It is a three-stage process. The taxpayer provides relevant available transfer pricing documentation, and if all relevant jurisdictions and the taxpayer agree, a risk assessment is developed by the tax administrations. The final stage includes a risk graded letter.
The program does not provide absolute certainty, although it may provide learnings into potential gaps, while also providing tax administrations some limited certainty after their comprehensive review.
The handbook, link attached, provides additional details.
Recent international tax developments include:
- US has communicated its concern to France regarding its Digital Services Tax
- US TCJA Section 250 final regulations will include guidance on “end-user” conformity and FDII documentation
- The IRS may use the new Advance Pricing and Mutual Agreement Program (APMA) Functional Cost Diagnostic Model released last February in examinations in appropriate cases, according to an IRS official this week
- GAO urged the IRS to develop a “comprehensive plan for managing efforts to leverage FATCA data in agency compliance efforts
- The Organisation for Economic Co-operation and Development’s Forum on Tax Administration (FTA) announced a second pilot of the International Compliance Assurance Program (ICAP 2.0). A new handbook that will guide the second pilot was also endorsed and published by the FTA. ICAP is a voluntary risk assessment and assurance program designed to facilitate open and cooperative multilateral engagement between multinational enterprise (MNE) groups willing to engage actively and transparently and tax administrations in jurisdictions where the MNEs have business activities.
Additional guidance, tax exam techniques and risk assessment are still very much in process in an effort to reduce uncertainty and provide faster resolutions to tax audits. EY’s Global Tax Alert provides additional details for reference.
Click to access 2019G_001616-19Gbl_Report%20on%20recent%20US%20international%20tax%20developments%20-%205%20April%202019.pdf
The Finnish Tax Administration (FTA) recently issued a reminder notice stating that the common practice of hiring Santa Claus to give presents are required to be reported (> EUR 1,500 this year).
Let’s not forget: Santa Claus must report the value of gifts distributed on his tax return, this year and next, less travel expenses! Does this mean he should keep his list, checking it twice?
Merry Christmas & Happy Holidays to all!
The French Ministry of Finance has released welcome initiatives comprising a list of aggressive tax structures, ten commitments for ways of working upon commencement of an audit, appointment of a national committee of experts in complex cases, and creating a R&D tax credit advisory board to provide consultation services to the taxpayer.
A link to PwC’s Tax Insights summary is provided for reference:
Click to access pwc-france-mof-transparency-measures.pdf
10 Audit commitments:
- Initial meeting to inform taxpayer of documents to be requested
- Ways of working in the tax audit
- First meeting devoted to understanding the business
- Milestone meetings
- Indicating the main audit objectives
- Taking consistent positions of similar issues in the same industry
- Meeting deadlines
- Providing a recourse process with access to auditor’s superior
- Maintaining confidentiality and tax secrecy as imposed by the law
- Identifying an individual within FTA for post-audit support procedures
This is a very welcome initiative that will provide win-win opportunities for audits and information requested. Additionally, this process serves as a Best Practices memorandum of understanding that should be discussed with auditors from other jurisdictions.
The Forum on Tax Administration (FTA), representing heads of tax administrations from 38 countries, concluded their 9th meeting on 24 October, 2014. The meeting represented attendance by over 130 delegations, including representatives from the African Tax Administration Forum (ATAF), Inter-American Center of Tax Administrations (CIAR), Centre de Rencontre des Administrations Fiscales (CREDAF), International Monetary Fund (IMF) and the Intra-European Organisation of Tax Administrations (IOTA). The meeting included strategic visions for the Mutual Agreement Procedure (MAP) and Co-operative Compliance programs.
Links to the meeting summary and MAP vision are included for reference:
Click to access fta-2014-communique.pdf
Click to access map-strategic-plan.pdf
The following actions were agreed:
- Enhanced cooperation strategy, based on existing legal instruments.
- Created a new international tax platform, Joint International Tax Shelter Information and Collaboration (JITSIC Network) to focus on tax avoidance.
- Implement the new standard on automatic exchange of information while protecting taxpayer confidentiality.
- Improve practical operation of Mutual Agreement Procedure (MAP) to address double tax issues more quickly and efficiently, integrated with the OECD BEPS action item. Competent authorities of all member countries are “encouraged” to actively participate in this initiative.
- Promote a voluntary compliance structure.
- Develop principles on Co-operative Compliance arrangements that form an integral part of effective tax control frameworks.
MAP Strategic Plan summary – “Statement of Vision and Commitment”
- Collaboration of the FTA MAP Forum with other multilateral bodies, including OECD’s Working Party 1’s Focus Group, to further its goals.
- Participating Competent Authorities (CAs) commit to the stated goals and be accountable thereto.
- Allocation of adequate staffing levels and resources to meet CAs working demands.
- Adequate training programs and personnel practices.
- FTA MAP Forum’s engagement to address resource challenges.
- Empowerment of CAs to effect agreements in accordance with principles in the respective tax conventions.
- Absence of undue influence by administrative policies, practices or goals.
- Support resolution of MAP cases in accordance with multilateral principles, avoiding efforts such as maximizing revenue collection.
- Adoption of principle based and mutual trust principles.
- Adopt Best Practices in the pursuit of new initiatives to streamline and enhance processes to expedite MAP resolution.
- Sharing MAP Best Practices among FTA MAP participants.
- New MAP processes to elevate difficult cases.
- Enhance taxpayer’s involvement in case resolution, including bilateral/multilateral meetings and sharing case developments.
- Seek ways to avoid MAP cases, including APAs, joint audits, “roll-forward” adjustments and other techniques.
- Use multilateral MAP procedures.
- Adopt agreements for issue consistency.
- Avoidance of MAP manipulation by auditors.
- Deliver training on double taxation and CA processes via a “Global Awareness Training Module.”
The above meeting commitments and objectives are welcome as tax controversies increase and MAP procedures have seeming lost the elements of timeliness, cost-effective resolution, avoidance of double taxation, transparency and efficiency.
It is hopeful that most tax administrations endorse, and commit to, the above MAP framework in an effort to achieve Best Practices for a win–win opportunity.
A new forum, open to all members of the Forum on Tax Administration (FTA), will convene later this year to discuss Best Practices for improving MAP. Topics that may be discussed include:
- Development of a strategic plan
- Resource limitations
- Relationship building
- Identifying trends in disputes
- Increasing APA’s and accelerated CA procedures
- Roll-over adjustments
- Multilateral case procedures
- Taxpayer’s involvement in MAP resolution
- Achieving certainty sooner for a win-win result
This new forum will be an interesting development for all.
The Forum on Tax Administration (FTA) was created in July 2002 by the OECD with the aim of promoting dialogue between tax administrations and of identifying good tax administration practices. The OECD link provides reference to the opening FTA remarks by Deputy Secretary-General Mr. Yves Leterme, and the Final Communique from the 16-17 May 2013 meeting in Moscow, Russian Federation.
The press release sets the stage with the following remarks:
- Tax base of governments is being threatened by international tax avoidance and evasion.
- Part of the answer to international avoidance by businesses is a question of tax policy, rather than administration.
- The development of a new set of international standards is going to require ever closer cooperation at the international level.
- International cooperation between tax administrations is enhanced by improved transparency, which helps tax administrations apply the rules effectively.
- Transparency is also key to the fight against international evasion.
- The OECD, working with the G20, is developing a new multilateral standard on automatic exchange of information.
The Final Communique’s first paragraph states the need to effectively address tax evasion, aggressive tax avoidance, trans-national tax fraud and aggressive tax planning. The Communique addresses the need for increased transparency and comprehensive exchange of information, and strongly endorses exchanging information automatically.
Most importantly, the Communique further states: “We have developed a framework of co-operative compliance for the large business segment that provides a sustainable basis for a relationship based on transparency, justified trust and confidence between tax administrations and business. We will continue to refine this framework, also working with the business community, and recommend all countries to adopt it.”
In today’s tax environment, against the backdrop of terminology including tax evasion, aggressive tax avoidance, tax fraud and aggressive tax planning, the recent and upcoming meetings of the OECD and related organizations are increasingly important. The trend of a formal cooperative compliance framework is becoming more evident, and multinationals should already be planning for ways to develop such relationships with tax authorities around the world in present and future audits.