Despite this opacity and technicality, tax practitioners who closely monitor trends and developments across the global tax landscape can furnish their companies and clients with early risk management and proactive decision-making support, ultimately mitigating the impact of unexpected occurrences.
Governments intends to establish a minimum taxation for large companies and is setting higher tax collection goals for the tax authorities.
Among the international tax issues is that of transfer pricing (TP), the highly complex nature of which makes it challenging to handle by MNEs. If mishandled, TP can be costly for stakeholders, resulting in audits, adjustments, penalties and double taxation, not to mention litigation.
BEPS has triggered fundamental changes to the approach taken by taxpayers, making it essential for in-house tax advisers to review the assignment of assets and risks within the value chain as construed by the OECD after BEPS, in order to check the group’s TP policy is aligned with OECD guidelines. Country-by-country reporting (CbCR) obligations guarantee that this exercise will be assessed by concerned tax authorities from now on.
In the event that a company, in whatever jurisdiction, finds itself the subject of a tax-related investigation, an awareness of the steps that should be taken to manage the process, as well as safeguard its ongoing relationship with tax authorities, is key.
As an alternative, tax auditors earn incentives based on the amounts reassessed, even if payment of the tax due is put on hold, for example if a bank guarantee is offered to tax authorities during the time the matter is reviewed by a court, and even if the case is lost.
Hence, retaining a tax adviser with litigation skills from the outset of an investigation is key to mitigate damage, as a court will only review what the audit file contains, unless it accepts additional evidence suggested by taxpayers.
Effective tax planning is a boon for companies operating in an increasingly complex international tax environment, with tax-efficient structures, improved internal functions and company-wide processes essential components of a winning plan.