SolutionsGlobal Tax
Controversy

Together with a network of very experienced and recognized tax litigators, TPA Global can help you resolve tax disputes in a more structured manner. The Global Tax Controversy (GTC) team offers you an extensive list of senior tax litigators, arbitrators and mediators, who are not only specialized in intricacies of international tax, but are fully up to date on all recent developments in the global tax arena. Their global reach brings to multinationals a ‘safe heaven’ of specialists, all renowned in their area of expertise.

TPA has been active in working in the field of dispute avoidance and resolution with various multinational companies operating in varying industries and can provide experience assistance through the following sets of tools and strategies developed by TPA specifically to cater to the needs of MNEs seeking to avoid and/or resolve disputes with tax authorities in a controlled, efficient and simple manner:

  • Managing risk in a pro-active manner to avoid getting hit by various IDRs and other tax audit surprises;
  • Defining an audit strategy along with processes to be followed throughout the management of any variety of TP controversy;
  • Creating 100% external transparency and 100% internal awareness on the status of any tax/TP ruling or settlement;
  • TP dispute avoidance communication with local authorities;
  • Use of business models during the choice of method in APAs, which better facilitates later modifications of both the business model as well as the APA;
  • Defining a more explicit “audit trail” to support the facts listed in an APA and to comply with the list of critical conditions contained in the APA;
  • Use of the pan-European APA process and request formats that have been developed by TPA specially for enterprises seeking a greater level of certainty in the EU;
  • Use of the transfer pricing dispute avoidance toolbox by TPA on the basis of vast experience over the years.

Dispute
Resolution

The need for dispute resolution stems from the fact that disputes between taxpayers and tax authorities are on the rise as more and more multinational companies employ special techniques for conducting business i.e., increased use of intangibles, novel business model configurations, decreased need for physical value creation to generate income, etc., which are not adequately dealt with under the scope of the current tax and transfer pricing regulations.

To be able to avoid and/ or resolve disputes, as a first step, MNEs need to be “in control” of their operations. Being “in control” consists of completion of the following three activities:

  1. Running a compliance cycle;
  2. Creating a proper and timely risk management structure; and
  3. Dealing pro-actively with dispute resolution
This timeline showcases the options available to the taxpayer to prevent a dispute and the options available after a dispute arises.

This timeline showcases the options available to the taxpayer to prevent a dispute and the options available after a dispute arises.

Tax Dispute
Prevention Tools

Dispute prevention tools are effective in preventing a tax and/or transfer pricing dispute before it arises. Such measures can be undertaken by the taxpayer, tax authorities, or both. Hence, they can be categorized into unilateral and multilateral dispute avoidance measures. The unilateral dispute avoidance measures include pre-audit settlements and unilateral APAs, while multilateral dispute avoidance measures are bilateral/multilateral APAs, MAP, safe harbour rules, and ISO Certification. The following sections describe the various dispute avoidance methods available to the taxpayers:

  • APAs
  • Pre-audit settlement
  • ICAP
  • BPPA

Tax Dispute
Resolution Tools

Due to the increasing global focus on transfer pricing, APAs and other unilateral dispute avoidance measures may not be adequate to completely isolate the taxpayer from a transfer pricing dispute. With the rise of digitalisation and with the introduction of new business configurations, it is often difficult to differentiate between a case of tax planning and tax fraud, especially at the preliminary stage such as while filing an APA. This is the reason behind the increasing number of audits, leading to unfavourable assessments.

This is when the dispute resolution measures are required in order to ensure appropriate taxation of transactions carried out between related parties. Such measures can be undertaken by the taxpayer, tax authorities, or both but in most cases, it is the taxpayer who initiates the dispute resolution mechanism. These can be categorized into unilateral and multilateral dispute resolution measures. The unilateral dispute avoidance measures include local court settlements including appeal procedures and recourse to other domestic remedies while multilateral dispute resolution measures include arbitration procedures, joint tax audits, simultaneous tax examinations, and mutual agreement procedures. The following sections describe the various dispute resolution methods available for transfer pricing disputes:

  • Local courts
  • Simaltaneous Tax Examinations
  • Joint tax audits
  • Mutual Agreement Procedure (MAP)
  • Arbitration under the OECD Model double tax avoidance convention

GTC for
Boards

Managing Boards of companies with international operations will find that tax is now an item on their agenda, since

  1. BEPS has enhanced the corporate information on taxes accessible by tax authorities, placing companies at a higher risk of disputes and potential double (or even triple or quadruple) taxation

  2. Additionally, the post-BEPS environment is making governments file personal liability claims against multinationals’ representatives/advisors AND

  3. BEPS is often triggering a significant reputational impact as well. Based on the reaction of tax authorities seen today, a wilful/fraudulent BEPS outcome could easily lead to a few years behind bars.

Boards and audit committees are therefore recommended to:

  • Take a structured approach to their global tax risk management;

  • Have a written version of their global value chain;

  • Make sure their storyboard on taxes is synchronized across countries;

  • Have a sound and implemented corporate governance policies in place for taxes;

  • Deal with personal liability issues upfront;

  • Agree on communication standards to all stakeholders.

GTC for
Professionals

More and more disputes are expected to be triggered by the way BEPS is working its way into local tax rules and regulations. Often BEPS concepts are applied to current open years by tax authorities, which could even include open years prior to BEPS. The absence of sound and functioning international dispute resolution mechanisms on tax matters raises the fear of double, triple and quadruple taxation of multinationals’ profits these days. The GTC team is available to multinationals as well as tax professionals, who may lack the deep knowledge on international tax controversy or simply do not have a local and regional expertise available on running such a complex process.

Professionals are recommended to:

  • Be fully trained on all international tax and BEPS related matters;

  • Be pro-active in their communication with their stakeholders on keeping ‘taxes under control’;

  • Discuss the status of implementation of corporate governance on tax with their stakeholders;

  • Take an active line of communication with stakeholders on ‘tax risks’, i.e. the approach of ‘hiding tax risks’ is not in line with today’s ‘best practices’;

  • Make pre-assessments of tax risks, before filing any tax documents and reports with tax authorities.

GTC for
Tax Authorities

In a world shifting towards full transparency on tax matters, a key challenge, among others, for the tax authorities will be to determine how best to deploy their available audit resources. Along with the benefits of obtaining ‘tax information’ on an almost ‘real time’ basis, there are quite some controversial topics for the tax authorities to deal with, such as:

  • Can I apply BEPS reports on all open tax years, with the risk of applying BEPS norms with a retrospective impact?

  • How to rank these information flows coming my way in terms of collecting ‘objective evidence’on facts on which taxation takes place? AND

  • How do i maintain a certain level of international tax and BEPS expertise to facilitate a normalized communication with taxpayers on these complex matters?

Tax authorities are recommended to:

  • Understand a multinational’s business model;

  • Assess a taxpayer’s tax positions/issues in selecting ‘audit cases’;

  • Rank the ‘evidence based facts’ to facilitate communication with taxpayers based on arguments;

  • Facilitate the right of multinationals against unjust taxation, where the taxpayer’s conduct has demonstrated ‘good faith’ compliance with the tax rules and regulations.

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