scholarly journals EU Members States legislation harmonization relating to controlled foreign companies in the area of anti-tax avoidance

Legal Ukraine ◽  
2020 ◽  
pp. 36-47
Author(s):  
Volodymyr Korol
Keyword(s):  
Economic Activity ◽  
Action Plan ◽  
Tax Avoidance ◽  
Building Blocks ◽  
Point Of View ◽  
Final Report ◽  
Profit Shifting ◽  
Eu Member States ◽  
Foreign Companies ◽  
Council Directive

The article is dedicated to the general aspects and peculiarities of the EU Member States legislation harmonization aimed at preventing avoidance of taxation by multinational companies through foreign entities or permanent establishments controlled by parent companies themselves or together with their associated enterprises. On the reasonable basis, the special emphasis was placed on the act of secondary legislation playing the key role in this important area, namely, Council Directive (EU) 2016/1164 of 12 July 2016 laying down rules against tax avoidance practices that directly affect the functioning of the internal market with regard to the controlled foreign companies rules. This Directive came into force on 1January 2019 and became an integral part of EU Anti-Tax Avoidance Package. Harmonization at the regional European level is being provided and, consequently, in-depth researched in the context of OECD/G-20 global Action Plan on Base Erosion and Profit Shifting. From methodological point of view, OECD Final Report on Action 3 BEPS was accepted as the analytical prism allowed the quintessence of constitutive rules of above mentioned EU Anti-Tax Avoidance Directive to be discovered properly. Accordingly, the comparative analysis was conducted through the lens of provisions of vast majority of aforesaid Final Report’s building blocks, more specifically, Rules for defining a CFC, Definition of CFC Income, Rules for computing income as well as CFC exemptions and threshold requirements, in particular, relating tax rate exemption, anti-avoidance requirement, de minimis threshold. Focusing attention on different important aspect related to CFC Income, it’s discovered special considerations of non-distributed income inclusion in the Member State taxpayer’s tax base of certain categories of passive income (interest, royalties, dividends, income from financial leasing, banking, invoicing companies, etc.) or arising from non-genuine arrangements with correlation, respectively, to entity and transaction approaches. Without limiting the foregoing, it’s discovered some argumentative issues considering European researchers as weaknesses of ATAD. It’s offered an illustration cause and effect relationship between non-recognition of passive income to be attributed to controlling parties and CFC’s substantive economic activity as far as there is reason to believe that it refuses to honor case law of the Court of Justice. Key words: controlled foreign company, passive income, substantive economic activity, non-genuine arrangement.

scholarly journals Ukrainian Tax Legislation and the EU acquis Novelties in the Context of BEPS Action Plan Implementation

2020 ◽  
pp. 221-234
Author(s):  
Volodymyr KOROL ◽  
Oksana NEBYLTSOVA
Keyword(s):  
Action Plan ◽  
Tax Avoidance ◽  
Final Report ◽  
Plan Implementation ◽  
Eu Member States ◽  
Foreign Companies ◽  
Tax Legislation ◽  
Council Directive ◽  
Legislative Model ◽  
Necessary And Sufficient

The article comprises comparative law analysis findings of the tax legislation of Ukraine novelties relating to controlled foreign companies coming into effect on January 1, 2021 in the context of provisions of the Council Directive (EU) 2016/1164 of 12 July 2016 laying down rules against tax avoidance practices that directly affect the functioning of the internal market which is effective as of January 1, 2019. The special consideration is given to the types and levels of control necessary and sufficient for qualifying foreign companies as controlled by residents, respectively, Ukraine or EU Member States required by the Tax Code of Ukraine and above-mentioned EU legislative act. In particular, it’s discovered that Ukrainian lawmakers introduced not just legal and economic control but also factual to be provided by residents-related persons. Alongside with that, the peculiarities of concentrated ownership concept, implemented within Ukrainian tax legislation modernized, are examined in depth. It’s highlighted key differences from two models described within OECD Final Report on Action 3 BEPS Project the most commonly used in the world resulting from accepting and integrating just separate elements of each of them. It’s researched both common aspects and differences between Ukrainian and EU’ approaches with regard to passive income which shall be attributed to controlled foreign companies’ controlling parties proportionally to their shares as well as substantive analysis allowing CFC rules non-application. Attention is focused on de-minimis requirements reasonableness and fairness stipulating non-inclusion of CFC’s certain share of income to the taxable income of the residents of Ukraine under the condition that the total revenues of all of the controlled foreign companies from all sources of one controlling party, either legal or physical person, are within limits of 2 million Euro per year. Comparative analysis provided affords ground for conclusion that legislative model relating to controlled foreign companies implemented by Ukraine is stricter significantly then EU’s one. It determines the risks of tax avoidance new tactics and strategies implementation by domestic taxpayers. Keywords: tax avoidance, controlled foreign company, tax burden, passive income, substantial activity, BEPS.

ANALISIS PENERAPAN CONTROLLED FOREIGN COMPANY RULES DALAM MENGATASI BASE EROSION AND PROFIT SHIFTING DI INDONESIA

INFO ARTHA ◽  
2017 ◽  
Vol 3 ◽  
pp. 1-14
Author(s):  
Alfa Mightyn ◽  
Arifah Fibri Andriani
Keyword(s):  
Action Plan ◽  
Tax Avoidance ◽  
Building Blocks ◽  
The Other ◽  
Foreign Company ◽  
Tax Revenue ◽  
Profit Shifting ◽  
The World ◽  
Domestic Law ◽  
Cfc Rules

One cause for the inability to achieve the expected tax revenue target for some last years was the practice of tax avoidance. One form of tax avoidance is the utilization of Controlled Foreign Company (CFC) to defer the recognition of income from overseas over WPDN capital to be taxed in the country. This practice is also faced by many other countries in the world. The issue of the Base Erosion and Profit Shifting (BEPS) has been of concern to developed and developing countries. G20 countries cooperate with OECD to form a BEPS Project to formulate measures to address these BEPS. Indonesia as one of the Associate Members of the Project BEPS has a position that is parallel to the other OECD countries and participates in implementing the BEPS results. BEPS Project has resulted in BEPS Action Plans which one of them is Action 3: Strengthening CFC Rules. Action 3 will provide recommendations to the domestic law related to the design of CFC Rules. Until now, related to Action 3, BEPS Project has issued a Public Discussion Draft Action 3: Strengthening CFC Rules. This draft is divided into seven "building blocks" required for CFC Rules to be effective. The aim of this study is to analyze the effectiveness of CFC Rules in Indonesia, whether it is sufficient to prevent BEPS. After that, we can determine what steps should be taken by Indonesian tax authorities to strengthen the CFC Rules in Indonesia based on seven dimensions of building blocks. The conclusions of this study are (1) CFC Rules in Indonesia as a whole have not been able to overcome BEPS; and (2) When compared with the recommendations of the Discussion Draft Action Plan 3, CFC Rules Indonesia needs to be improved. However, the necessary improvements should be adjusted to match the needs and characteristics of Indonesia. 

scholarly journals Taxation of Controlled Foreign Companies in Context of the OECD/G20 Project on Base Erosion and Profit Shifting as well as the EU Proposal for the Anti-Tax Avoidance Directive – An Interim Nordic Assessment

2016 ◽  
Vol 2016 (2) ◽  
pp. 87-112 ◽  
Author(s):  
Peter Koerver Schmidt
Keyword(s):  
European Commission ◽  
Tax Avoidance ◽  
Nordic Countries ◽  
Foreign Company ◽  
Profit Shifting ◽  
Current Form ◽  
Eu Member States ◽  
Foreign Companies ◽  
Cfc Rules ◽  
The Eu

Abstract Recently, the controlled foreign company (CFC) rules have gained increased attention; as such, rules play an important role in the ongoing efforts of the OECD/G20 and the European Commission with respect to addressing base erosion and profit shifting (BEPS). In this context, the article revisits the CFC regimes of the Nordic countries in order to assess whether these regimes are in line with the recommendations from the OECD/G20 and to determine whether Sweden, Finland, and Denmark, as EU member states, will have to make amendments if the commission’s proposal for an Anti-Tax Avoidance Directive is adopted in its current form. It is concluded that the Nordic CFC regimes in many ways already are in line with the recommendations as well as the directive, but also that certain amendments have to be made.

scholarly journals The specifics of applying value added tax for local authorities

2010 ◽  
Vol 58 (3) ◽  
pp. 67-78
Author(s):  
Miloš Grásgruber ◽  
Petra Mísařová
Keyword(s):  
Public Administration ◽  
Economic Activity ◽  
Value Added ◽  
The European Union ◽  
Value Added Tax ◽  
Local Authorities ◽  
Eu Member States ◽  
Common System ◽  
Council Directive ◽  
The Impact

If local authorities units carry out an economic activity, are considered to be taxable under Act No. 235/2004 Coll., On Value Added Tax as amended. Adjustment of VAT in all countries of the European Union is based on Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax as amended. The application of this directive is binding for all EU member states and national treatment of VAT may diverge from the Directive only in cases where the Directive permits. Decisions of the European Court of Justice are of considerable importance during the interpretation of the Czech VAT Act.For the municipalities and regions article defines the activities that are considered to be an economic activity and activities that are deemed to exercise of public administration and are not therefore subject to VAT. Further the paper defines the concept of turnover of local authorities. At paper there are evaluating the impact of the application of VAT on municipalities and regions in the provision of the individual fulfillment. Great attention must municipalities and region devote to the problem of correct application of claim to tax deduction if they carry out the exercise of public administration, taxable activities and fulfillments exempt from VAT.

scholarly journals Permanent establishment as a foreign direct investment in Poland: identification of tax barriers in the context of new tax development

2021 ◽  
Vol 57 (2) ◽  
pp. 177-193
Author(s):  
Marcin Jamroży ◽  
Magdalena Janiszewska
Keyword(s):  
Foreign Direct Investment ◽  
Economic Activity ◽  
Direct Investment ◽  
Business Models ◽  
Tax Avoidance ◽  
Tax Law ◽  
Profit Shifting ◽  
New Developments ◽  
Permanent Establishment ◽  
International Tax

Abstract The paper aims to identify the significant tax barriers to foreign direct investment (FDI) in Poland, in particular in the form of a permanent establishment (PE), in the context of new developments in international tax law. Due to the recommendations of the Base Erosion and Profit Shifting (BEPS) project, launched by Organisation for Economic Co-operation and Development (OECD) to prevent international tax avoidance, the understanding of PE has changed, which could lead to changes in business models. The purpose of the research is also to identify the significant tax barriers to economic activity in Poland, in particular in the form of PE, against the international tax law context. The study conducted by the authors relies on the most current tax rulings and judgments of administrative courts issued between 2017 and 2020. It is concluded that not so much the effective tax burdens but the regulatory ambiguity surrounding the tax obligations may contribute to the reduction of Poland's attractiveness as a location for FDI.

scholarly journals Tax Avoidance through Controlled Foreign Companies under European Union Law with Specific Reference to Poland

2017 ◽  
Vol 7 (1) ◽  
Author(s):  
Błażej Kuźniacki
Keyword(s):  
Multinational Enterprises ◽  
Tax Avoidance ◽  
Specific Reference ◽  
Eu Law ◽  
Legal Analysis ◽  
Profit Shifting ◽  
European Union Law ◽  
Member States ◽  
Effective Prevention ◽  
Foreign Companies

Abstract This article demonstrates that tax avoidance via controlled foreign companies (CFCs) established in the most favourable tax environments among EU Member States such as Ireland, Luxembourg, the Netherlands, and Cyprus, remains a considerable problem. Not only does it affect taxpaying residents in the Member States but, indirectly, all taxpayers regardless of their EU affiliation, US multinational enterprises (MNEs), for example. Focusing on the use Polish taxpayers make of CFCs, this study undertakes a detailed legal analysis of the problem of tax avoidance under EU law by examining empirical data and EU law on tax avoidance. The choice of this topic is largely justified by the exponential rise in tax avoidance schemes through CFCs involving Polish taxpayers since the country’s accession to the EU. The legal analysis brings to light a series of weaknesses in the current EU law that make it possible for both EU and non-EU taxpayers to avoid taxation. As a solution to this problem, the author suggests that CFC rules should be designed so as to tax only “tax avoidance income” from CFCs. This would ensure their compliance with EU law as well as an effective prevention of tax avoidance via CFCs within the framework of EU law. Interestingly, the solution follows from the author’s interpretation of the concept of “wholly artificial arrangements” in favour of the internal market rather than from Action 3 of Base Erosion and Profit Shifting (BEPS) project or Anti-Tax Avoidance Directive as adopted by the Council on 12 July 2016.

Der OECD-Aktionsplan gegen die Steuervermeidung multinationaler Unternehmen – eine ordnungsökonomische Analyse der Maßnahmen und Reformoptionen

2015 ◽  
Vol 64 (2) ◽  
Author(s):  
Marco C. Melle
Keyword(s):  
European Union ◽  
Action Plan ◽  
Tax Avoidance ◽  
Multinational Companies ◽  
Constitutional Economics ◽  
The European Union ◽  
Profit Shifting ◽  
Corporation Tax ◽  
National Corporation ◽  
Avoidance Strategies

AbstractOn July, 19th, 2013 the OECD published an „Action Plan on Base Erosion and Profit Shifting“, a catalogue of 15 actions against the tax avoidance strategies of multinational companies. The intention of the present paper is to investigate and evaluate if such a coordination of the national policies is necessary from a constitutional economics perspective. The thesis is that the planned actions against the tax avoidance strategies of multinational companies can strengthen the relation of the national corporation tax revenues to the use of public goods. However, the question arises if for interest and royalty payments an international coordinated withholding taxation would not be preferable and if the European Union additionally should not agree on a common assessment base for corporate taxation.

Arbitration and tax treaty disputes

2019 ◽  
Vol 35 (4) ◽  
pp. 473-504
Author(s):  
Michelle Andrea Markham
Keyword(s):  
Dispute Resolution ◽  
Action Plan ◽  
Final Report ◽  
Profit Shifting ◽  
The Past ◽  
The World ◽  
Arbitration Procedure ◽  
International Tax ◽  
Dispute Resolution Mechanism ◽  
Mutual Agreement

Abstract The Organisation for Economic Cooperation and Development’s Base Erosion and Profit Shifting Action Plan and its implementation around the world over the last few years has brought about widespread and fundamental changes to the international tax framework. A corollary of these changes has been an increase in international tax treaty disputes, as newly-designed rules are challenged by both taxpayers and tax administrations. This article seeks to examine how such controversies have been addressed in the past, and to evaluate whether in this new environment arbitration may provide the key to successful tax treaty dispute resolution, despite concerns regarding national sovereignty. It considers the changes effected to the traditional tax treaty dispute resolution mechanism under the Mutual Agreement Procedure by the Action 14 Final Report on Making Dispute Resolution Mechanisms More Effective. Furthermore, it evaluates the use of arbitration under the Multilateral Instrument, as well as the application of certain reservations and options available in this regard. It explores some of the benefits of instituting an arbitration procedure that will ensure resolution for all international stakeholders. Finally, it considers the potential for Advance Pricing Agreements to proactively resolve tax treaty disputes, and the need for taxpayers to take a strategic and informed view of controversy management in the international tax sphere.

scholarly journals THE INFLUENCE OF BEPS INITIATIVES ON FORENSIC EXPERTISE CONCERNING THE ISSUE OF TRANSFER PRICING

2020 ◽  
pp. 575-584
Author(s):  
I. Hrinenko ◽  
Yu. Hrinenko
Keyword(s):  
Tax Evasion ◽  
Transfer Pricing ◽  
Action Plan ◽  
Competent Authority ◽  
The State ◽  
Economic Activities ◽  
Profit Shifting ◽  
State Budget ◽  
Foreign Companies ◽  
Mutual Agreement

Ukraine has joined the BEPS (Base Erosion and Profit Shifting) action plan to combat tax evasion and increase tax transparency around the world. In other words, the state must respond appropriately to ensure the taxation of profits in the country where the taxpayer is engaged in economic activities. Such actions will reduce the transfer of capital to jurisdictions with low levels of taxation, which in turn will help to increase the revenues of the state budget. With regard to the implementation of the provisions of the BEPS Action Plan, Law No. 465-IX introduced the concept of taxation of profits of controlled foreign companies at the level of the controlling entity; introduced a three-tier documentation structure for international groups of companies, which includes transfer pricing documentation (local file), global documentation (master file) and country-by-country reporting; implements provisions 8 to 10 of the BEPS plan to control the distribution of functions, risks and intangible assets within a group of companies, improve the rules for commodity transactions by eliminating the restriction on the use of stock quotes of certain exchanges and allowing the use of quotations for such commodities; the procedure for carrying out the mutual agreement procedure has been determined, which provides for the mechanism of submitting the application for the consideration of the case under the mutual agreement procedure, the requirements for such application, the procedure for the action of the competent authority, etc .; introduced the concept of taxation of dividends equal to dividends, which provides for adjustments to the methodology and procedures envisaged to control transfer pricing when conducting transactions with non-residents.

scholarly journals Selected Aspects of Protectionism of EU Member States in the EU Agri-Food Market

2018 ◽  
Vol 18(33) (2) ◽  
pp. 82-94
Author(s):  
Renata Grochowska ◽  
Adam Ambroziak
Keyword(s):  
Economic Activity ◽  
Policy Instruments ◽  
Selective Reduction ◽  
The European Union ◽  
Negative Effects ◽  
Member States ◽  
Eu Member States ◽  
Foreign Companies ◽  
Foreign Products ◽  
The Eu

Tendencies in national actions against foreign products currently observed in the European Union indicate protectionism or at least discrimination. The aim of this article is describe economic mechanisms of applying selected import-related policy instruments of Member States and to identify some potential directions of their impact on the functioning of the EU agri-food internal market. The presented mechanisms are related to three situations: (a) hindering the market entry through retargeting of consumer demand; (b) promotion of own products contrary to the fair rules of competition; (c) limiting economic activity of foreign companies. The analyses carried out allowed to identify economic activity areas, where negative effects could reveal and to state that the potential result of these activities may be selective reduction of trade or change of its directions.

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