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A Closer Look

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A Closer Look GLOBAL TAX WEEKLY ISSUE 145 | AUGUST 20, 2015 a closer look SUBJECTS TRANSFER PRICING INTELLECTUAL PROPERTY VAT, GST AND SALES TAX CORPORATE TAXATION INDIVIDUAL TAXATION REAL ESTATE AND PROPERTY TAXES INTERNATIONAL FISCAL GOVERNANCE BUDGETS COMPLIANCE OFFSHORE SECTORS MANUFACTURING RETAIL/WHOLESALE INSURANCE BANKS/FINANCIAL INSTITUTIONS RESTAURANTS/FOOD SERVICE CONSTRUCTION AEROSPACE ENERGY AUTOMOTIVE MINING AND MINERALS ENTERTAINMENT AND MEDIA OIL AND GAS COUNTRIES AND REGIONS EUROPE AUSTRIA BELGIUM BULGARIA CYPRUS CZECH REPUBLIC DENMARK ESTONIA FINLAND FRANCE GERMANY GREECE HUNGARY IRELAND ITALY LATVIA LITHUANIA LUXEMBOURG MALTA NETHERLANDS POLAND PORTUGAL ROMANIA SLOVAKIA SLOVENIA SPAIN SWEDEN SWITZERLAND UNITED KINGDOM EMERGING MARKETS ARGENTINA BRAZIL CHILE CHINA INDIA ISRAEL MEXICO RUSSIA SOUTH AFRICA SOUTH KOREA TAIWAN VIETNAM CENTRAL AND EASTERN EUROPE ARMENIA AZERBAIJAN BOSNIA CROATIA FAROE ISLANDS GEORGIA KAZAKHSTAN MONTENEGRO NORWAY SERBIA TURKEY UKRAINE UZBEKISTAN ASIA-PAC AUSTRALIA BANGLADESH BRUNEI HONG KONG INDONESIA JAPAN MALAYSIA NEW ZEALAND PAKISTAN PHILIPPINES SINGAPORE THAILAND AMERICAS BOLIVIA CANADA COLOMBIA COSTA RICA ECUADOR EL SALVADOR GUATEMALA PANAMA PERU PUERTO RICO URUGUAY UNITED STATES VENEZUELA MIDDLE EAST ALGERIA BAHRAIN BOTSWANA DUBAI EGYPT ETHIOPIA EQUATORIAL GUINEA IRAQ KUWAIT MOROCCO NIGERIA OMAN QATAR SAUDI ARABIA TUNISIA LOW-TAX JURISDICTIONS ANDORRA ARUBA BAHAMAS BARBADOS BELIZE BERMUDA BRITISH VIRGIN ISLANDS CAYMAN ISLANDS COOK ISLANDS CURACAO GIBRALTAR GUERNSEY ISLE OF MAN JERSEY LABUAN LIECHTENSTEIN MAURITIUS MONACO TURKS AND CAICOS ISLANDS VANUATU GLOBAL TAX WEEKLY a closer look Global Tax Weekly – A Closer Look Combining expert industry thought leadership and team of editors outputting 100 tax news stories a the unrivalled worldwide multi-lingual research week. GTW highlights 20 of these stories each week capabilities of leading law and tax publisher Wolters under a series of useful headings, including industry Kluwer, CCH publishes Global Tax Weekly –– A Closer sectors (e.g. manufacturing), subjects (e.g. transfer Look (GTW) as an indispensable up-to-the minute pricing) and regions (e.g. asia-pacifi c). guide to today's shifting tax landscape for all tax practitioners and international fi nance executives. Alongside the news analyses are a wealth of feature articles each week covering key current topics in Unique contributions from the Big4 and other leading depth, written by a team of senior international tax fi rms provide unparalleled insight into the issues that and legal experts and supplemented by commentative matter, from today’s thought leaders. topical news analyses. Supporting features include a round-up of tax treaty developments, a report on Topicality, thoroughness and relevance are our important new judgments, a calendar of upcoming tax watchwords: CCH's network of expert local researchers conferences, and “The Jester's Column,” a lighthearted covers 130 countries and provides input to a US/UK but merciless commentary on the week's tax events. ©2015 CCH Incorporated and/or its affi liates. All rights reserved. GLOBAL TAX WEEKLY ISSUE 145 | AUGUST 20, 2015 a closer look CONTENTS FEATURED ARTICLES Managin g Th e Corporate Tax Consequences Can Renzi Fix Italy’s Broken Tax System? Of International Assignments Stuart Gray, Senior Editor, Global Tax Weekly 25 Kenton J. Klaus, Partner, Deloitte Tax LLP 5 Domicile Under Cypriot Tax Law Supply Chain Planning In Th e Post-BEPS Era: Zoe Kokoni, Taxand 30 Five Questions For MNEs Michael F. Patton and Oscar Burakoff , DLA Piper 10 Topical News Briefi ng: World Wide Web Of Tax Topical News Briefi ng: Th e Global Tax Weekly Editorial Team 32 Doing Nothing Is An Option! Th e Global Tax Weekly Editorial Team 15 Focus On FBAR Mike DeBlis Esq., DeBlis Law 34 Brazil: Current Trends In International Cost Sharing Sergio André Rocha, Andrade Advogados Associados 16 NEWS ROUND-UP Corporate Taxation 37 VAT, GST, Sales Tax 41 South African Review Against Higher Mining Taxes Airbnb Hosts Could Face Irish Tax Bills Chile Eases Burden Of New Tax Reforms ATO Explains New Tax Rules For ‘Ride-Sourcing’ SARS Revises Guide On New Hire Tax Incentive IMF Calls For Single VAT Rate In China UK Tax Breaks Boosting SME Investment: Report NZ Seeks Feedback On Online GST Proposals Cairn Energy Wants Swift End To Indian Tax Dispute Compliance Corner 44 Tax Reform 51 Vietnamese Firms Happy With Tax Admin Reforms No Plans To Harmonize EU CIT Rates, Says Moscovici OECD Tracks Tax Admin Changes In 56 Countries Greece’s Th ird Bailout Measures Agreed IRS To End Automatic Extension For Information Returns TAX TREATY ROUND-UP 54 Country Focus: United States 47 CONFERENCE CALENDAR 57 Terex Goes On US Inversion Trail IN THE COURTS 69 Half Of Large US Firms Anticipate ‘Cadillac’ Tax Liability THE JESTER'S COLUMN 75 House Committee Underlines Importance Of US Th e unacceptable face of tax journalism Patent Box Individual Taxation 49 Foreigners Contribute EUR6.8bn In Italian Income Tax UK Th ink Tank Calls For Ride Sharing Tax Breaks Progressive UK Tax System ‘A Myth,’ Says TPA For article guidelines and submissions, contact [email protected] © 2015 CCH Incorporated and its affi liates. All rights reserved. FEATURED ARTICLES ISSUE 145 | AUGUST 20, 2015 Managing The Corporate Tax Consequences Of International Assignments by Kenton J. Klaus, Partner, Deloitte Tax LLP Contact: [email protected] , Tel: +1 312 486 2571 Th is article does not constitute tax, legal or other ad- will be shared between the sending and receiving vice from Deloitte Tax LLP, which assumes no respon- companies. Th is documentation may also include sibility with respect to assessing or advising the reader the use of secondment agreements or other inter- as to tax, legal or other consequences arising from the company agreements, which create or preserve ap- reader's particular situation. propriate ties with the home and host country em- ployers to support the desired corporate tax results. Copyright © 2015 Deloitte Development LLC. All rights reserved Mitigating Permanent Establishment (PE) Risk Introduction Th e presence of international assignees in a foreign International assignments for employees can have country may give rise to a PE by the home country complex individual tax implications. Th is is why employer in that host location. Th e creation of a PE many companies engage outside tax advisers to meet could lead to income arising in that country that is with the employees before they begin their assign- subject to corporate tax. Th e OECD (Organisation ment. However, these assignments can also create for Economic Co-operation and Development) tax consequences for the companies involved in the model tax convention defi nes a PE as "a fi xed place transfer. With an increased focus by international of business through which the business of an en- tax authorities on the corporate tax consequences terprise is wholly or partly carried on." 1 PE is more and permanent establishment (PE) risks of these specifi cally defi ned within the tax treaties between assignments, it is important that the sending and member countries and, while there is a general receiving companies have also done their home- agreement internationally on its defi nition, there work in advance of the assignment. For example, is a great deal of discrepancy in the details of each such advanced planning may involve more careful country's interpretation of how a PE is established. documentation of how the assignment economics Th ese varying considerations as to how and when a 5 PE is created can be problematic for tax planning by the business, or a group of employees may create a home country companies, who are generally look- PE if they are performing services for a customer ing to avoid host country taxation at the corporate with a PE in Canada. 3 While these rules are unique level and may be operating in multiple jurisdictions to the US and Canada, they are illustrative of the that have diff erent interpretations of PE. types of specifi c requirements that may exist within a treaty that should be considered when analyzing Th e OECD model convention also states that an PE risks for each location. individual person who is acting on behalf of a com- pany may create a PE if that individual has and uses Supporting Th e Deductibility the ability to enter into contracts for the business. 2 Of Compensation Costs A person is considered to have the ability to en- Another corporate issue related to international as- ter into contracts on behalf of an enterprise in a signments is where the costs of that assignment are country if the person is authorized to negotiate all deductible. Since international assignments are typ- elements and details of a contract in a way bind- ically more expensive than hiring local personnel in ing on the enterprise, even if the contract is signed the assignment country, the sending and receiving by another person outside the country. Th is rather companies need to be thoughtful on how much of narrow defi nition that a PE can be created by an these costs are allocated to each location. Th e two individual person underscores the critical need for companies may enter into an agreement, either sep- pre-assignment planning to avoid the inadvertent arate or part of the secondment agreement, which establishment of a PE by a single international as- allocates the costs of the assignment between them. signee. Simply avoiding establishing a physical of- Th is agreement can address the benefi ts that each fi ce in a country is not suffi cient to avoid PE. company receives from the employee's assignment. For example, the receiving company may benefi t Th e OECD model convention serves as the start- from the services of the employee, and the send- ing point for treaties. However, variation may exist ing company may benefi t from an employee who between an enacted treaty and the OECD model; has additional training and skills due to the assign- a company must take care to understand the spe- ment.
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