Last November 2019 21st and 22nd OECD organized a public consultation on the Unified Approach under Pillar 1
You can find the complete input DET3 contributed to that process in the reports section of our web, but see please below the
EXECUTIVE SUMMARY of our input:
- Strong need to clarify concepts & definitions, specifically regarding:
- Excluded industries
- Level of the market of activities in scope (B2C / or B2C + B2B)
- Remote interaction
- Activities behind the portion of the residual profit allocated through A amount
- Highly regulated industries such as financial services, utilities or telecom, or regulated activities fulfilling certain criteria should be left out of scope
- Revenue alone should not be sufficient to trigger the New Nexus rights; Consider introducing complementary qualitative KPIs supporting the “sustained and significant remote involvement“ in the market country.
- If confirmed that A amount covers sales & marketing intangibles residual profit allocation to the markets, the NTR should spot when there is meaningful remote commercial interaction with a consumers base from abroad, likely with strong assistance of digital technology.
- The NTR should not in our view be triggered when the majority of revenue obtained in the market is derived by a local entrepreneurial customer facing entity with appropriate substance that pay arm’s length taxes locally
- When NTR applies, a minimum segmentation for activities or Business Lines may become necessary, although it will generate significant workload as the process itself will bring a high level of complexity.
- Flexibility is needed for MNEs to define their level of activities aggregation. Homogeneous approach in information sources will be required
- A consistent methodology should be used to determine the profits affecting A, B & C amounts in a way that can be traced and reconciled. To avoid double/multiple taxation, but also to facilitate review and administration of the new system under the Unified Approach
- Examples of the interactions between the NTR rules and current profit allocation rules will be appreciated
