EBF Annual Tax Conference 2016
BEPS: impact for business and banks’
specificities
Wim Eynatten
2 February 2016
Practically BEPS is structured around 15
actions with three main impacts for MNEs
BEPS Pillar
Coherence
Actions
1. Digital economy
2. Hybrids
3. CFC rules
4. Interest deductions
5. Harmful tax practices
6. Abuse of tax treaties
7. Permanent establishment
8 – 10 : Transfer Pricing
Substance
Transparency
3 main impacts
Enlarged
taxable basis
• Interest
• Taxable
presence
• Profit allocation
Increased
Compliance
• TP
documentation
• Disclosure of tax
information
Uncertainty
• GAAR
• MAP?
• Harmful tax
practices?
• Abuse of tax
treaties?
11. Data collection on profit shifting
12. Disclosure of tax planning
arrangements
13. TP Documentation
14. Arbitration
15. Multilateral Instrument
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Potential BEPS impact for banks
15 Actions around 3 main pillars
Coherence
Substance
Transparency and Certainty
Preventing Tax Treaty Abuse (6)
Hybrid Mismatch Arrangements
Measuring BEPS (11)
(2)
Hybrid Mismatch Arrangements
(2)
Hybrid Mismatch Arrangements
Avoidance of PE Status (7)
(2)
Hybrid Mismatch Arrangements
CFC Rules (3)
(2)
Hybrid Mismatch Arrangements
Disclosure Rules (12)
(2)
TP Aspects of Intangibles (8)
Hybrid Mismatch Arrangements
Interest Deductions (4)
(2)
Hybrid Mismatch Arrangements
TP Documentation (13)
(2)
Hybrid Mismatch Arrangements
TP/Risk and Capital (9)
(2)
Hybrid Mismatch Arrangements
Dispute Resolution (14)
(2)
Harmful Tax Practices (5)
Hybrid Mismatch Arrangements
(2)
TP/High Risk Transactions (10)
Digital Economy (1)
Multilateral Instruments (15)
Taken from OECD live webcast “The BEPS Package” – 5 October 2015
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Actions 2, 4 and 6
Key considerations
I.
Hybrid mismatches
Interest deductions
Preventing treaty abuse
• The proposals will require changes
toII.domestic legislation and are
likely to take effect from 2017 or
later.
• Specific rules for banks and
insurance companies are still
awaited with final proposals to be
released in 2016.
• The general proposed LOB rules
broadly prevent treaty relief from
applying unless an entity can show
that its ultimate beneficial owner is
entitled to equivalent treaty relief.
• There is no exclusion for
securitisation issuers or SPVs.
• Creates pressures for fund entities
– some relief measures for CIVs.
• There is no grandfathering of
existing arrangements, so
III.
taxpayers will need to consider
whether their arrangements fall
within the scope of the rules.
• Jurisdictions remain free to exclude
hybrid regulatory capital from their
hybrid mismatch rules / apply
special rules, which could lead to
increased complexity.
• This leaves whole area of
uncertainty around non-CIV, SPV’s,
private funds, securitisation etc.
• Implications for equity trading
businesses.
VI.
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Action 7 - Permanent Establishments
Two key changes:
Updating the dependent agent definition
•
“habitually concludes contracts, or habitually plays the principal role leading to the conclusion
of contracts that are routinely concluded without material modification by the enterprise and,
these contracts are a) in the name of the enterprise, or b) for the transfer of ownership of […]
property owned by that enterprise [… or] c) for the provision of services by that enterprise ”
•
Independent agent exemption will not apply where the agent acts “exclusively or almost exclusively”
for closely related enterprises
Tackling artificial avoidance of PE status through the specific activity exemptions
•
Are the activities ‘preparatory or auxiliary’ for the enterprise’s business as a whole?
•
Further guidance on the meaning of ‘preparatory or auxiliary’
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Action 7 - Permanent Establishments
Examples of activities potentially caught by the widening of the PE
definition
• Remote booking
• Asset management – marketing and distribution services
• Electronic platforms
• Short term visitors
• Private banking
• Corporate banking
• M&A advisory
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Action 7 - Permanent Establishments
Example 1: Remote booking
model
UK
Booking entity
Transaction
booked onto BS of
the UK
US
Hong Kong
Sales team
Trader employing • Contract
concluding
employing entity
entity
activities
• Reliance on
independent agent
status
Critical new words in Article 5(6)
“… Where, however, a person acts exclusively or almost exclusively on behalf
of one or more enterprises to which it is closely related, that person shall not
be considered to be an independent agent”
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Action 7 - Permanent Establishments
Example 2: Short term
visitor/Marketing and distribution
Principal
Contract
concluded
Country R
Country S
STV / M&D
Third party
customers
Critical new words in Article 5(5)
“or habitually concludes, or habitually plays the principal role leading to the
conclusion of contracts that are routinely concluded without material
modification by the enterprise”
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Action 7 - Permanent Establishments
Effect of recognising new PEs:
• Different approaches to profit allocation in different jurisdictions
• Increased compliance costs
• Accounting consequences
• Regulatory position could be affected
• New tax reporting obligations
• Other taxes: bank levy, indirect taxes, withholding taxes, exit taxes
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What should banks consider?
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4 key actions to be considered by banks
•
•
•
•
Determine the data to gather and implement data collection process
Analyse and check the data
Back-test the results on the precedent fiscal years
Anticipate the possible analyses of tax authorities and test the compliance of
the TP policy with the economic substance of the Group
Review the
current tax
positions
•
•
•
•
•
Use of hybrids
Debt / interest policy
Use of commissionaires / agents
Booking models
Short term business traveller programs
Adjust tax
strategy
• Adjust tax strategy towards business strategy (more integrated vision and
anticipation)
• Align profits with value creation (tax optimisation = business optimisation)
• Transform the tax teams, towards a more business oriented activity
Prepare tax
communication
strategy
• Define level of information to be disclosed
• Define the communication packages by type of stakeholders (tax
administrations, shareholders, public opinion…): annual report, specific tax
report…
• Brief and align the management (including business)
I
Prepare for
the new reporting
requirements
II
III
IV
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