Magazine

Cover Story

Tax controversy: Heavyweight audits on the rise

Tax certainty has taken a big hit from the COVID-19 pandemic after already suffering from cross-border issues in a post-BEPS environment. Danish Mehboob explains how tax dispute management tools will be less effective at achieving tax certainty as TP audits get aggressive.

Features

Market insight

There have been some significant new hires across a range of tax firms around the world.
Strong recruitment plan crucial to appoint the best judges, says Chief Counsel

Kristen Kane, chief counsel of California's Office of Tax Appeals (OTA), talks to ITR about how the agency manages the struggle to recruit the best judges.
Tax sector is failing to address racism

Anti-racist protests in the US and worldwide have brought attention to a global problem. Racism still exists in the tax sector and more needs to be done to tackle the issue.
Changing structural racism: Starting at the bottom

Companies need to work harder to ensure senior leadership and management in any business is more diverse, but the problem of racism in the tax sector needs to be dealt with at the points of university education and the first job.
The Brockman Brief: Resolving disputes in uncertain times

Keith Brockman looks at how to prevent and resolve disputes just as the international tax system is changing.
Discussion: OECD and KPMG discuss the complexities of tax morality

Grace Perez-Navarro, deputy director of the OECD's Centre for Tax Policy and Administration, and Jane McCormick, global head of tax and legal services at KPMG International, discuss what it means to be ‘morally’ tax compliant.
China’s STA introduces tax measures to manage COVID-19 implications

The State Taxation Administration of China (STA) explains which measures it has implemented for all taxpayers to manage the social and economic implications of the coronavirus.
Taking a bite out of Apple leaves a sour taste

The European General Court (EGC) shocked tax policymakers when it ruled in favour of the US technology company in the state aid case of the decade. Yet many taxpayers found the decision reassuring because it reaffirmed old conventions of international tax.
How COVID-19 changed the tax world

The COVID-19 pandemic has hit businesses and their employees hard, as well as the wider domestic and global economies.
Working in tax for a struggling business

The tax team is the last to leave when a company fails. A former tax executive from collapsed travel company Thomas Cook tells ITR how the tax department managed the business’ closure.
Businesses stick to TP compliance strategies despite COVID-19

Tax professionals have managed to keep up with compliance challenges in transfer pricing despite the COVID-19 pandemic.
Landmark Indian cases on the scope of preparatory and auxiliary activities

Sanjeev Sharma, principal director of income tax (investigation) at the India Income Tax Department, discusses recent court decisions in India concerning the scope of ‘preparatory’ and ‘auxiliary’ activities.
How to prevent a tax dispute or mitigate its damage

Opportunities to come to a resolution with the tax authorities are generally better the earlier they present themselves in the life-cycle of a tax dispute, says Sandy Markwick, head of the Tax Director Network (TDN) at Winmark.
Indonesia’s ‘special relationship’ concept could trigger ALP in independent transactions

Indonesia’s revised “transactions affected by special relationship” concept could mean certain independent transactions trigger the application of the arm’s-length principle (ALP) if authorities determine a special relationship exists. Nala Kurniawan and Bobby Savero from the Indonesian tax authority explain.
Transfer pricing risk and its cost on businesses in the GCC

Hany Elnaggar, head of tax for the Middle East at Nissan, highlights the transfer pricing developments happening across the Gulf Cooperation Council (GCC) member countries and how audits are becoming a bigger concern for businesses.
James Karanja reflects on five years of Tax Inspectors Without Borders

In this two-part interview, outgoing Head of the Tax Inspectors Without Borders (TIWB) Secretariat James Karanja talks to ITR about what TIWB has achieved over the past five years, the impact of COVID-19 and how the organisation will achieve its goals by 2030.
Constructive engagement is vital for mutual MNE and tax authority trust

James Karanja, head of the Tax Inspectors Without Borders (TIWB) Secretariat, tells ITR how multinational enterprises (MNEs) need to adapt as tax administrations gain auditing skills through TIWB initiatives.
Taxation of Space: The dark side of mining the Moon

US President Donald Trump recently signed an executive order to mine the Moon. Existing tax models will not be sufficient for extra-terrestrial mining and will require new frameworks.
How California’s Office of Tax Appeals decides cases within 100 days

California’s Office of Tax Appeals (OTA) explains how it delivers its final opinions on appeals within 100 days of a hearing, despite receiving more than 120 new appeals every month.
How to avoid being exposed to tax disputes

Many years ago, I was responsible for a tax group that reported to a regional group services organisation and not to the global head of tax. A new manager, with no experience of tax, had just taken over responsibility for group services and was looking to find out what each of his new teams actually did and for simple performance metrics.
Companies cautious of post-COVID tax incentives and private rulings

Tax directors are cautious about new tax incentives and private rulings being offered to attract foreign direct investment because of the changing economic situation and reputational risk.
Businesses continue to seek certainty on tax residency

India is the latest country to address forced corporate tax residency issues, amid the COVID-19 pandemic, as more countries consider adapting rules to align with OECD guidance.
Companies seek benchmarking guidance on post-COVID-19 economy

International organisations like the OECD may have to issue guidance on benchmarking to address taxpayer concerns that the data will not accurately reflect economic conditions in the post-pandemic economy.
Crisis recovery tax incentives could lead to BEPS 3.0

As countries provide incentives to attract foreign investment, the OECD may have to readdress the BEPS framework in the post-COVID future.
Uber prepares for long-term TP changes after COVID-19

Francois Chadwick, vice president of finance, tax, and accounting at Uber, is working with KPMG on efforts to monitor global tax guidance and possibly adjust the company’s transfer pricing (TP) policy.
Equalisation levy: The challenges ahead for India’s DST

Arvind Singal and Nitin Kapoor of RBS Services India explain the difficulties for businesses caught by India’s equalisation levy and how foreign companies outside the e-commerce sector may fall under the scope of the expanded tax.
Confusion over arm’s length pricing rise amid COVID-19

Businesses are finding it difficult to deal with transfer pricing (TP) data and how to apply an arm’s-length analysis in a global economy that looked completely different just six months ago.
Indirect tax becomes more strategic during COVID-19

Indirect taxation and the teams responsible for it are becoming more important in supporting companies to manage cash flow and maximise tax relief opportunities to deal with the economic impact of COVID-19.
EU state aid cases raise fundamental questions about TP practices

The Apple case is just one of many disputes between the European Commission and multinational companies that revolve around fundamental questions about transfer pricing (TP), in particular the arm’s-length principle (ALP).
Apple wins EU state aid battle over Irish tax structure

The European General Court (EGC) has ruled against the European Commission in the Apple case, meaning the US company does not have to repay €13 billion ($14.8 billion) in state aid benefits it received in Ireland.
The European Commission responds to the Apple state aid case

The European Commission has defended its controversial 2016 Apple state aid decision after losing the case at the European General Court (EGC), but some lawyers are not anticipating an appeal.

Special Features

News Analysis

Brazil's government reveals tax reform proposal

The Brazilian government has revealed its long-awaited plan to combine two federal consumption taxes – PIS and COFINS – into a single VAT, reinvigorating discussions over the country’s tax reform.
Cameco CEO says Canada Revenue Agency should re-write TP rules

Tim Gitzel, president and CEO of Cameco, has said the Canada Revenue Agency (CRA) should consider changing the country’s transfer pricing (TP) regime if it is not happy with the Federal Court of Appeals’ decision.
Is the Mauritius tax treaty network crumbling?

Tax researchers and academics expect a long-term domino effect on treaty renegotiations across Africa after Senegal and Zambia terminated their double tax agreements with Mauritius and countries want to maximise their taxing rights.
CJEU’s ruling in BlackRock VAT case could spark service segmentation

A European Court of Justice (CJEU) judgment on BlackRock’s UK VAT liability could prompt businesses across the EU to review supplies of fund management services and split VAT exempt and non-exempt services.
Critics take apart UK plans to split Big Four audit practices

The Big Four accounting firms have four years to separate audit activities from tax and other consultancy work, but critics argue this will not address “fundamental issues” in the sector.
Desk audits for MNEs to increase after COVID-19

Physical distancing measures and a backlog of cases may see tax authorities turn from field to desk audits that may be more aggressive as governments try to recover the costs of the pandemic.
Businesses prepare for Gulf’s expansion into corporate taxes

Tax directors based in the United Arab Emirates (UAE) foresee corporate taxes in 2021 after Saudi Arabia broadened its tax base by tripling its VAT rate, a move that is likely to widen tax systems in other Gulf Cooperation Council (GCC) countries.
US Supreme Court declines to hear Altera’s case

The US Supreme Court refusal to hear Altera’s case against Treasury regulations on stock-based compensation has, in effect, handed a landmark victory to the IRS. However, the transfer pricing issues the case raised remain open.

Tax Relief

International Correspondents

Australia evaluates impact of COVID-19 on transfer pricing

Eddie Ahn of DLA Piper discusses how the Australian government has moved to assist business and taxpayers affected by the coronavirus outbreak.
Brazil: STJ confirms tax treaty benefits apply on cross-border services income

Alvaro Pereira and Mark Conomy of PwC Brazil take a look at a key STJ decision will assist companies carrying out cross-border transactions.
Chile: New items of deductible expenses

Rodrigo Winter and Raúl Fuentes of PwC Chile review the changes and lay out the new requirements to be met.
China: Master plan for Hainan free-trade port unveiled

Lewis Lu of KPMG China sets out the low tax rates and simplified tax categories planned for the Hainan hubs in development.
Hong Kong SAR: Relief measures are tax-exempt under the anti-epidemic fund

Lewis Lu and John Timpany of KPMG analyse the tax exemptions provided on subsidies and financial assistance granted under the anti-epidemic fund.
Taxing cross-border e-commerce transactions in India

Rishi Kapadia and Saurabh Shah of Dhruva Advisors look at how India has embraced the growing digitalisation of its economy and assess the implications of their measures.
Indonesia imposes VAT on imported digital supplies

Jeklira Tampubolon and Aditya Nugroho of GNV Consulting lay out the rules regarding the upcoming imposition of VAT on the use of intangible goods and taxable services imported into Indonesia via electronic systems.
UK announces post-Brexit customs tariff

Christian Deglas and Michel Lambion of Deloitte Luxembourg explore the details of what the UK’s independent tariff policy will encompass.
Case study: How to adjust group transfer pricing during COVID-19

Yves Hervé and Philip de Homont of NERA Economic Consulting present a real-life case study explaining how the correct transfer pricing techniques can somewhat alleviate the harsh economic effects of the pandemic.
Greece: The art of applying indirect audit methods

Konstantina Galli of EY Greece explores the mechanics of the application of indirect audit methods, and considers their effectiveness.
Italy: Relaunch decree aims to restore the economy after the COVID-19 emergency

Gian Luca Nieddu and Barbara Scampuddu of Hager & Partners explain the tax breaks put forward in the government’s ambitious relaunch decree following the coronavirus pandemic.
Strengthening anti-tax avoidance rules in Malta

Ramona Azzopardi, Fiorella San Martin and Joselyn Teuma of WH Partners explain how Malta has strengthened its financial certainty by successfully implementing the ATAD II regulations to its domestic legal system.
Mexico stands alone in its tax relief response to COVID-19

Mauricio Martínez D´Meza Violante and Ricardo Gonzales Orta of Deloitte Mexico discuss why the Mexican government has opted to take an alternative approach from its international counterparts, in relation to its assistance to businesses affected by the coronavirus outbreak.
Netherlands: Supreme Court broadens VAT deduction for vacant properties

Sebastiaan Wijsman and Maxine Rigot of DLA Piper consider the impact of the Dutch Supreme Court’s recent judgment on taxation in the real estate sector.
New Zealand: Changes to foreign investment consent rules include tax measures

Brendan Brown and Matt Woolley of Russell McVeagh outline the tax implications following amendments to New Zealand’s overseas investment regime.
Norway rules on the exercise of discretionary assessments in TP cases

Emilie Aslaksen and Oscar Brown of Deloitte present the key takeaways from a recent Supreme Court judgment on the Norwegian tax authority’s exercise of discretion.
Romania: OECD guidelines on tax residence evoke uncertainty

Claudia Sofianu and Geanina Ciorâţă of EY Romania consider the tax implications arising from restrictions on the free movement of the workforce as a result of the coronavirus pandemic.
Accelerating the pace of digital transformation in Singapore

Sivakumar Saravan and Liew Kin Meng of Crowe Singapore examine how measures set forth in Singapore’s recent budget announcements will help businesses adapt to new norms arising from the coronavirus pandemic.
The transposition of DAC6 in Spain

Juan Luis Zayas Zabala and Nicolás Cremades Leguina of Garrigues explore what the introduction of DAC6 means for the Spanish tax world.
Sweden: Considering how TP documentation may impact exemptions from tax surcharges

Maria Andersson and Fredrika Wendleby of KPMG Sweden consider the situations where transfer pricing (TP) documentation may result in a partial or full exemption from tax surcharges.
Marking 25 years of the Swiss VAT system

Constant Dimitriou and Katharina Blattner of Deloitte Switzerland explain how 25 years later, the Swiss VAT system continues to evolve.
Thailand announces tax measures to manage COVID-19 outbreak

Saravut Krailadsiri and Sasipailin Chaisechotes of Kudun & Partners discuss how the Thai government has moved to assist businesses and taxpayers affected by the coronavirus outbreak.
US: Tax Court to decide on foreign taxpayer’s right to deductions in Adams Challenge

Mark Martin and Thomas Bettge of KPMG in the US report on the next steps in the Adams Challenge case following the tax court’s decision on the taxability of continental shelf charter income.

Magazine
Summer 2020

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