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Finland is the latest in a long line of countries to rule on location savings The Finnish Supreme Administrative Court (SCA) rendered a landmark decision on March 4 2013, explains Kennet Pettersson of Ernst & Young. The main dispute concerned location savings and whether such benefits could be allocated to a foreign low cost subsidiary. Though the SCA's decision rejected the locations savings which were sought to be applied in the case at hand, the decision clearly recognises location savings and the allocation of these benefits to a low cost subsidiary provided similar functions were conducted in Finland before the reorganisation and benefits availed can be clearly crystallised. The case concerns a Finnish limited liability company (Company A) which set up a new manufacturing subsidiary in Estonia in 2004. The Estonian subsidiary solely manufactured goods for Company A. Because of this contractual arrangement, the Estonian subsidiary could be regarded as a contract manufacturer. Company A's position in the case was that the savings attained through the lower costs of manufacturing in Estonia should be partly allocated to the Estonian subsidiary. Consequently, the fee charged for goods manufactured by the Estonian subsidiary was based on the manufacturing costs with an added margin including half of the savings that were availed when compared with costs if manufactured in Finland.

Gonzalo Schmidt Gabler Felipe Dominguez Celis The Chilean tax dispute resolution system has always separated the administrative procedure from the judicial procedure; therefore, the taxpayer could design its strategy by deciding when to present its evidence, before the administrative authority or the Tax Tribunal (held by the tax authority), or in both. However, this double instance to produce evidence has suffered an important limitation in the tax dispute process, since on January 27 2009, Act N° 20.322 came into force, which "strengthens and perfects the tax and customs jurisdiction", being one of the most important reforms to the tax justice system administration in Chile.

Renaud Jouffroy Fabien Cotte It is still uncertain whether a cross border transfer of a cash pooling activity within a group may constitute an indirect transfer of profit. In 2011, the Paris Administrative Court ruled that the transfer of a cash pooling activity without compensation from a French company to another member of the group located in a foreign jurisdiction (Switzerland) qualifies as an indirect transfer of profits. Therefore, the tax authorities have been entitled to reassess Nestlé up to the value of the activity transferred, retaining a profit margin of 0.5%, which according to the tax authorities corresponded to the usual profit margin applied by various multinational companies for such an activity.

On February 13 2013, the OECD released a report on tax planning by multinationals that reduces group corporate tax liability to an unacceptably low level, as a first step against base erosion and profit-shifting (BEPS). In the preceding months Starbucks, Google and several others were publicly attacked for not paying their “fair” share. Johann Muller, a member of the international corporate taxation department at the Danish Tax Authority – submitting this article in a personal capacity in advance of the OECD Working Party No 6 meeting in March – examines the issues that need to be addressed when looking at examples 1 and 2 to Annex C of the BEPS report.

Will Morris has devoted his career to tax policy and is involved in a number of organisations including GE, the OECD, the American Chamber of Commerce, the EU and the Confederation of British Industry (CBI). Here he talks to Sophie Ashley about how tax policy is affecting tax systems around the world and the difficulties involved in balancing a number of roles while managing internal tax policy for a large multinational company.

Taxpayers and authorities are alive to the calls for greater transparency. And though this is building public pressure on tax authorities to milk multinational cash cows for all they can get, there is a growing realisation among authorities that ill-designed international tax rules and strains on resources, as well as the complex manner in which multinationals arrange their tax affairs, means that working with – rather than against – the largest taxpayers is the best way forward.

Elena Kostovska On December 4 2012, the FYR Macedonian Parliament ratified the income tax treaty signed with Kazakhstan. The ratification was published in the Official Gazette 154 on December 7 2012. The treaty, initially signed between the two countries on July 2 2012, covers the personal income tax and profit tax in FYR Macedonia and the corporate income tax and the individual income tax in Kazakhstan. As is usually the case, the treaty is mostly harmonised with the OECD model; however, certain specifics can be noted.

Canada’s 2013 federal budget (Budget 2013) was released on March 21 2013 and focused on spending in support of job creation and on tightening a number of tax measures. It also included a number of significant developments from a cross-border perspective that are highlighted here.

The OECD has given its backing to the introduction of a Chinese carbon tax in its Economic Survey of China 2013. However the government may already be pushing forward with environmental tax reform.

A monthly commentary on the notable facts, figures and goings-on in the tax world.