European Direct Tax

On June 17, 2015, TEI submitted comments on the OECD revised discussion draft on BEPS Action 8: Hard-to-Value Intangibles. The Institute's comments focused on the need to limit the use of ex post information (hindsight) by tax authorities to price previous transfers of intangible assets as such information is not used in similar transactions between unrelated parties. The Institute noted, among other things, that use of hindsight would likely result in additional controversy and disputes between taxpayers and tax authorities.

On June 16, 2015, TEI submitted comments on the OECD revised discussion draft on BEPS Action 6: Prevent Treaty Abuse. The Institute's comments focused on the need for certainty in the determination of when taxpayers will qualify for treaty benefits so businesses can plan their cross-border operations. TEI also noted, among other things, that the proposed changes to the OECD model tax convention will create taxation where none has previously existed, in contravention of the traditional purpose of tax treaties to eliminate double taxation and prevent tax evasion.

On May 28, 2015, TEI submitted comments on the OECD BEPS discussion draft Action 8: Revisions to Chapter VIII of the Transfer Pricing Guidelines on Cost Contribution Arrangements (CCAs). The Institute's comments focused on the OECD's new value-based approach to services contributed to a CCA as a departure from the OECD's current transfer pricing guidelines, along with the need for additional examples in the discussion draft, among other things.

On May 28, 2015, TEI submitted comments on the OECD revised discussion draft on BEPS Action 7: Preventing the Artificial Avoidance of PE Status. The Institute's comments focused on the need for certainty in the definition of a permanent establishment (PE) in double tax treaties so businesses can plan their operations with an accurate forecast of the amount of tax due. TEI also noted that the proposed changes to the PE definition will significantly broaden its scope and thus increase the compliance and administrative burden on taxpayers.

On April 30, 2015, TEI submitted comments on Action 3: Strengthening CFC Rules of the OECD’s BEPS project.  The Institute’s comments focused on the need for the OECD to recommended consistent CFC rules across jurisdictions to decrease the chance of double taxation arising from widespread adoption of the rules and to reduce the compliance and administrative burden on taxpayers and tax authorities, among other things. 

On April 29, 2015, TEI submitted comments regarding Action 12:  Mandatory Disclosure Rules of the OECD’s BEPS project.  The Institute recommended that the OECD adopt an objective, uniform, and limited approach to mandatory disclosure rules to limit the compliance and administrative burden on taxpayers and tax authorities alike.  TEI also recommended that the OECD ensure that the benefits of an additional international mandatory disclosure regime outweigh the costs to taxpayers, among other things.

On February 19, 2015, TEI submitted comments to the OECD’s Forum on Harmful Tax Practices regarding the modified nexus approach to preferential intellectual property tax regimes under BEPS Action 5. The Institute’s letter focused on the fact that the modified nexus approach would require many multi-national enterprises to substantially reorganize their operations to take advantage of preferential tax regimes specifically enacted to attract business and that such reorganizations are costly and may not be undertaken.

On January 15, 2015, TEI submitted comments to the OECD on its Public Discussion Draft regarding BEPS Action 14: Make Dispute Resolution Mechanisms More Effective. TEI’s comments emphasized the importance of fair, timely, and effective dispute resolution mechanisms to taxpayers as a means to relieve double taxation. The Institute also recommended that double tax treaties include an arbitration process to settle disputes between countries that cannot be settled by the respective Competent Authorities in a timely manner.

On February 6, 2015, TEI submitted comments to the OECD regarding its BEPS public discussion draft entitled BEPS Actions 8, 9 and 10: Revisions to Chapter I of the Transfer Pricing Guidelines (Including Risk, Recharacterisation, and Special Measures). TEI’s comments emphasized the complexity of global business operations today and the difficulty that presents for applying a transfer pricing approach that is based primarily on functions.

On February 6, 2015, TEI submitted comments to the OECD regarding its BEPS public discussion draft entitled BEPS Action 10: Discussion Draft on the Use of Profit Splits in the Context of Global Value Chains. TEI’s comments focused on the need for transfer pricing analysis to begin with the contractual arrangements between related parties within a multi-national group. The Institute’s recommendations included that a profit split generally continue to be considered as a transfer pricing method of last resort.