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International Tax
Breakfast Briefing
Radisson Golden Lane
26 April 2016
Deloitte Tax
© 2016 Deloitte2
Opening remarks
Lorraine Griffin
Head of Tax
International Tax Issues
Tom Maguire, Tax Partner
26 April 2016
Al Pacino
© 2016 Deloitte 5
© 2016 Deloitte 6
© 2016 Deloitte 7
1.Use of offshore loans
2.Hybrid loans
3.Hybrid entities
4.Interest-free loans
5.Two tiered IP structures
6.Patent Box structures
7.IP and Cost Contribution
agreements
© 2016 Deloitte 8
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Cypru
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Gre
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Spain
Fin
lan
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Fra
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Cro
atia
Hunga
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Irela
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Ita
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Unite
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EU anti avoidance directive
11
+
EU anti avoidance directive
12
+
Country by Country
Reporting
Interest
Hybrids
Exit taxation
Switchover
GAAR
Public Country by Country
Reporting
EU anti avoidance proposals
13
+
Country by Country
Reporting
Interest
Hybrids
Exit taxation
Switchover
GAAR
Public Country by Country Reporting
© 2016 Deloitte 14
© 2016 Deloitte 15
Company A
Country A
Country B
© 2016 Deloitte 16
Company A
Country A
Country B
• Exit tax on specified transfers of
assets or transfer of residence
• Instalment over 5 years or until third
party disposal
• Receiving Member State to provide
a step-up to fair market value.
• Tax should be charged where
assets are transferred from a head
office to a branch.
© 2016 Deloitte 17
Company A
Country A
Country B
“Foreign” country
© 2016 Deloitte 18
Dividends and capital gains from low-taxed
companies
Tax with credit
Statutory tax rate <40% of the tax rate
Ireland a “tax with credit” but s626B
© 2016 Deloitte 19
Public CBCR
© 2016 Deloitte 20
© 2016 Deloitte 21
EU Group
€750m turnoverEU Group
€750m turnover
Large/medium
EU presence
© 2016 Deloitte 22
EU Group
€750m turnoverEU Group
€750m turnover
• description of activities
• no. of employees;
• net turnover
• profit before tax;
• income tax accrued,
• income tax paid;
• accumulated earnings.
Large/medium
EU presence
© 2016 Deloitte 23
EU Group
€750m turnoverEU Group
€750m turnover
Large/medium
EU presence
• description of activities
• no. of employees;
• net turnover
• profit before tax;
• income tax accrued,
• income tax paid;
• accumulated earnings.
EU
Country basis
Havens
Country basis
ROW
Aggregate basis
© 2016 Deloitte 24
UK has led calls for public disclosure of what
tax big firms pay where, as EU proposing today.
UK leading world in tax evasion fight
© 2016 Deloitte 25
Company’s tax strategy
• Group’s approach to UK tax risk mgt
• Group’s attitude towards tax planning
• The level of UK risk Group prepared to accept
• Group’s approach towards HMRC dealings
© 2016 Deloitte 26
General Anti-Avoidance Rule (‘GAAR’)
Non-genuine arrangements or a series thereof carried out for the
essential purpose of obtaining a tax advantage that defeats the object
or purpose of the otherwise applicable tax provisions shall be ignored
for the purposes of calculating the corporate tax liability. An
arrangement may comprise more than one step or part.
© 2016 Deloitte 27
© 2016 Deloitte 28
© 2016 Deloitte 29
© 2016 Deloitte 30
© 2016 Deloitte 31
to know
to conclude beyond reasonable doubt
to conclude as probable
to reasonably suspect
mere suspicion and belief
© 2016 Deloitte 37
1. Authorize the IRS to treat
certain related-party interests
as part stock and part debt for
federal tax purposes;
2. Establish documentation
requirements that must be
satisfied for certain related-
party debt to be respected for
federal tax purposes; and
3. Treat certain related-party debt
as stock for all purposes of the
Code when issued in
connection with certain
distributions and acquisitions
© 2016 Deloitte 38
Instruments issued between
members of a group that files a
consolidated return.
Cashfunded related-party debt
provided not used for certain
specified distributions or acquisitions
BUT related-party debt issued
• in a distribution;
• in exchange for related party stock;
or
• in certain asset reorganizations
would be treated as “stock”
Refinancing – 36 month pre and post
© 2016 Deloitte 39
1. The issuer has unconditional legally
binding obligation to pay a sum certain
on demand or at fixed dates;
2. The holder has the enforcement rights
of a creditor
3. The issuer’s financial position supports
a reasonable expectation that the issuer
intended to, and would be able to, meet
its obligations under the terms of the
instrument.
Al Pacino
© 2016 Deloitte41
International Tax Environment
Brendan Crowley
Department of Finance
International Tax Environment – 26 April 2016
Department of Finance
Contents
• Policy making context
• EU Tax agenda
• OECD tax agenda
• Other international tax issues
Policy making context
• New Government
• New fiscal rules: preventative arm of Stability and Growth Pact
• 2015 Tax expenditure guidelines
• Evaluations, costings
• Periodic reviews
• Transparency: lobbying legislation, FOI
• Finance Bill/Budget
• Submission before your holidays, not after
• Consultation
• Engagement
EU
• Dutch Presidency Priorities
• Followed by Slovakia, Malta (non-OECD), UK
• Irish priorities:
• Consistency with BEPS
• Not in favour of minimum effective taxation
• Anti-Tax Avoidance Directive:
• BEPS actions - Hybrids, CFCs, Interest
• GAAR, Exit Tax, Switchover
EU COMMISSION
• Third countries: (black)listings
• Panama Papers
• Code of conduct group
• Working methods, transparency, governance
• KDB notification
• Mandate
• CC(C)TB – September?
OECD
• Multilateral Competent Authority Agreement
• Multilateral instrument
• Transfer pricing guidelines – June 2016
• Work continuing: hard-to-value intangibles; finance transactions
• Other remaining work re treaty abuse (LOB)
Wider international picture
• Brexit
• CT impact?
• OECD, EU
• Indirect taxes – border issues
• US Reform(?)
• Deemed repatriation
• Inversions
• Panama Papers – Transparency
For more information please go to:
http://www.finance.gov.ie
Copyright 2016 Department of Finance
Disclaimer
This presentation is for informational purposes only.
The Department of Finance does not guarantee the accuracy or completeness of information which is contained in this document and which is statedto have been obtained from or is based upon trade and statistical services or other third party sources. Any data on past performance containedherein is no indication as to future performance.
No representation is made as to the reasonableness of the assumptions made within or the accuracy or completeness of any modelling, scenarioanalysis or back-testing.
All opinions and estimates are given as of the date hereof and are subject to change.
The information in this document is not intended to predict actual results and no assurances are given with respect thereto.
Felix Skala, Partner, Deloitte Legal Germany
26 April 2016
State Aid
State Aid
Introduction
51
State Aid
Introduction
52
“Changing environment”
Why should legal advice on State Aid issues be added to tax services?
• State aid is part of the changing international tax landscape
• Risk assessment
• Analysis of the risk of existing rulings falling within the scope of state aid
• Analysis of the risk of beneficial tax treatment without rulings falling within the
scope of state aid
• Understanding the procedural rights
State Aid
Introduction
53
CJEU: “Although direct taxation falls within the competence of the Member States,
they must exercise that competence consistently with EU law”
Direct taxation
• Tax sovereignty of Member
States
• Free to design national tax
system
• Tax system aims at achieving
revenue and / or policy
objectives
State aid
• Art. 107(1) applies in
relation to the effects of
a State measure
• Hence includes tax
measures
• Policy objectives do not
prevent measure from
being State aid
State Aid
54
Impact on Advance Tax Rulings (ATRs) and APAs
• Tax rulings are not per se unlawful State Aid. However, tax rulings might
constitute unlawful State Aid if they deviate from the normally applicable tax
system by lowering the tax that would otherwise have to be paid.
In the case of tax ruling the focus is on whether such rulings are
“selective”
• In focus of the EU Commission: wide range of unilateral or bilateral cross-border
Rulings and Advanced Pricing Agreements covering TP principles (transactions
between associated enterprises and HQ’s and branches), unilateral downward
adjustments etc.
• State Aid law control reaches back 10 years (even in case of grandfathering
under national law).
State Aid
Concept
55
© 2016 Deloitte 56
Measure by the
State or through
State resources
Competition has been
or may be distorted
Measure is likely to
affect trade between
Member States
Giving rise to an
advantage on a
selective basis
1 2
3 4
State Aid
Four criteria
State Aid
© 2016 Deloitte 57
State Aid
The accepted scheme deviates from
the OECD arm's length principle in
determining net profit allocation of a
given entity or misapplies domestic or
tax treaty law
The financial parameters of the ruling
lack motivation in economic terms
and are not substantiated by any
generally accepted methodology
The taxable basis has been freely
negotiated with the tax authorities
without any reference to other
comparable transactions
Issuance of tax ruling without any
transfer pricing studies
Authorities imposed conditions on a
discretionary basis for issuance of tax
rulings
Costs attributable to a given
entity have no economic basis
but are the result of reverse
engineering calculations
The ruling is open-ended in time
The profit allocation factors are
not consistent throughout the
company's organization
Various aspects to consider
State Aid
© 2016 Deloitte 58
Member State (MS)
COOPERATION
European Commission
Preliminary Examination / Formal Investigation
Court of Justice of the European Union
(CJEU)
Appeal/Action for annulment of
decision
New measure
Preliminary
examinationNotification
Formal
investigation
STATE AID
Possible recovery
of the Aid with
interest
(max 10 years)
CJEU
Possible
appeal by
MS before
the CJEU
NO STATE AID
Final
decision
by the
EC
Preliminary
examination
of measure
Alleged
unlawful aid
Procedural Aspects
State Aid
© 2016 Deloitte 59
• The beneficiary is not party to the preliminary examination and formal
investigation procedure but may submit comments (generally within one month
after the decision to initiate the formal investigation procedure has been
published in the Official Journal of the EU).
• Final decision of Commission:
Positive decision (= approval, aid but compatible with Common Market)
Conditional decision (= approval with compatibility conditions or obligations of
monitoring)
Negative decision (= prohibition; aid incompatible with State aid rules,
prohibition to put aid into effect)
Recovery decision (= prohibition; Member State has to recover incompatible
aid plus interest)
• After final decision of the Commission the beneficiary can take action for
annulment against the decision under Article 263 TFEU.
• The beneficiary can take action in national court against recovery order.
State Aid
Procedural Aspects
© 2016 Deloitte 60
Rationale
behind the
recovery
10 years
+ interest
In case of an unlawful
State Aid, a recovery of
the aid already paid out
to the beneficiaries plus
interest may be
requested to the
Member State
Beneficiaries
cannot raise
the point of
legitimate
expectation
Recovery
obligation upon the
Member State
concerned
State Aid
Recovery
© 2016 Deloitte 61
A State Aid granted without prior approval of the Commission is illegal.
Member State must recover illegal State Aid.
Amount to be recovered: Granted State Aid plus interest
In case of “Tax State Aid” the amount to be recovered is the difference
between the amount actually paid and the amount which should have
been paid if the generally applicable rule had been applied (plus interest).
National courts are competent for enforcement.
If the Member State does not recover the illegal State Aid, the EU
Commission might launch infringement proceedings before the ECJ.
State Aid
Legal consequences
© 2015. For information, contact Deloitte Touche Tohmatsu Limited. 62
Bios
62
© 2016. For information, contact Deloitte Touche Tohmatsu Limited. 63
Felix Skala, LL.M. is an attorney at law and partner at Deloitte Legal Germany in the Hamburg office. He joined the firm in 2003 and is head of the competition law department of Deloitte Legal Germany as well as the international Deloitte Legal Working Group “Antitrust”.
Felix has 12 years+ experience in advising domestic and international clients in all areas of German and European antitrust and competition law. He has broad experience in all legal matters related to state aid law and government incentives.
Felix received a Master of Laws degree (LL.M.) at Boston University and is also admitted to the New York Bar.
Phone: +49-40-378538-0Email: [email protected]
Speaker bio
Changing Role of Tax
Departments
Karen Frawley
Tax Partner
Managing Evolving
Expectations
Changing role of tax function
© 2016 Deloitte65
How does it influence
your stakeholders’
expectations?
What can you learn
from the experience of
others?
Which activities should
you prioritise?3. Progressing your plan of
action
© 2016 Deloitte66
1. Understanding your changing environment
2. Developing a robust global tax
strategy & management
model
Stakeholder Management
Environmental
pressures
shaping our
world
© 2016 Deloitte67
Facing big questions from stakeholders
“What would a
5bp increase in
our ETR mean
for us?”
“How do we
know if we are
compliant across
all our taxes,
everywhere?”
“What and
where are our
biggest tax
risks?”
“What is the
total cost of my
tax function?”
Tax Authorities
© 2016 Deloitte68
Tax leaders –
not just tax… Things don’t show up
at your door as a tax
issue, they show up
as a business issue
and it’s your job to
find out whether there
is a tax issue
His predecessor believed he
was to mitigate the tax bill vs.
how to structure for
maximization of revenue/profit.
Go out and partner/present
TAX in a different way to the
organization and position as a
“Strategic business partner”
vs. a TAX department
Different things we may
think about that might be
optimal from a TAX
perspective might be
constraining from a
treasury perspective — it’s
essential to have that open
and early on dialogue
Keeping cross-function and
cross business relationships
strong and making sure he is
aware of more than just the TAX
implications — a lot of players
could impact tax rate
Executive
Diplomacy — The
best way to say no
is to explain the why
so “I can
understand”
I want him to have a
forward-looking
strategy. I want him on
skis. His eyes should be
way down the hill, not
on his feet underneath
him.
The best tax
people are the
ones you
don’t realise
are tax people
until they tell
you
© 2016 Deloitte69
Tax risk profile of organisation
70 © 2016 Deloitte
Directors’
compliance
statement
71
Companies Act 2014: sets out a requirement for a
directors’ compliance statement to be included in the
directors’ report
Applies from: financial periods beginning on or after
1 June 2015
Applies to: all plcs and other large limited
companies with a balance sheet total of €12.5 million
and turnover of €25 million
Directors’ compliance statement
Income Tax PAYE PRSI Benefits in Kind USC Corporation Tax
R&D Tax
Credit Customs Duty Excise Duty CGT
%Capital
Acquisitions Tax
Withholding
Tax
Stamp Duty
VAT
VAT
Tax obligations
arising from
mortgagee in
possession DIRT
Tax Relief at
Source (TRS) Encashment
Tax
PSWTDouble taxation
relief/credits Transfer pricing
Relevant
Contracts
Tax
Local Property
Tax
Reporting
obligations
under EU Savings
Directive
Directors’ Compliance StatementRelevant Tax Obligations
73
© 2016 Deloitte73
Developing a robust
global tax management
model
© 2016 Deloitte74
Developing a tax management model
© 2016 Deloitte75
Transfer Pricing – Technology
Operational Transfer Pricing Playbook
Insight Preparation of Documentation
Template reports TP Digital Dox Review, design and advisory services
Technology and Systems
Country-by-Country reporting
CbC Insite SmartCbC Digital Exchange
TP Data Analytics
TP Insite Smart
© 2016 Deloitte76
Shifting from a host of challenges to a plan
From a host of ongoing challenges To a structured plan
© 2016 Deloitte77
Strike the right balance
between your
stakeholders’ needs
Consider
governance,
operating models,
resourcing and
technology together
Tactical wins can
form part of a longer,
more strategic
program
3. Progressing your plan of
action
© 2016 Deloitte78
1. Understanding your changing environment
2. Developing a robust global tax
strategy & management
model
Stakeholder Management
Panel Discussion
• Pádraig Cronin, Vice-Chairman of Deloitte Ireland and Tax
Partner
• Joan O’Connor, International Tax Partner
• Karen Frawley, International Tax Partner
• Gerard Feeney, Head of Transfer Pricing
79 © 2016 Deloitte
Closing remarks
Lorraine Griffin
Head of Tax
© 2016 Deloitte80
81
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