16. Primero is the parent company of an MNE group engaged in the pharmaceutical business and does business in country M. Primero develops patents and other intangibles relating to Product X and registers those patents in countries around the world. 17. Primero retains its wholly owned country N subsidiary, Company S, to distribute Product X throughout Europe and the Middle East on a limited risk basis. The distribution agreement provides that Primero, and not Company S, is to bear product recall and product liability risk, and provides further that Primero will be entitled to all profit or loss from selling Product X in the territory after providing Company S with the agreed level of compensation for its distribution functions. Operating under the contract, Company S purchases Product X from Primero and resells Product X to independent customers in countries throughout its geographical area of operation. In performing its distribution functions, Company S follows all applicable regulatory requirements. 18. In the ... Read more

A OECD statement has been issued where 130 countries and jurisdictions have agreed to join and support the two pillar plan. A small group of 9 countries have not yet joined the Statement. “The two-pillar package aims to ensure that large Multinational Enterprises (MNEs) pay tax where they operate and earn profits, while adding much-needed certainty and stability to the international tax system. Pillar One will ensure a fairer distribution of profits and taxing rights among countries with respect to the largest MNEs, including digital companies. It would re-allocate some taxing rights over MNEs from their home countries to the markets where they have business activities and earn profits, regardless of whether firms have a physical presence there. Pillar Two seeks to put a floor on competition over corporate income tax, through the introduction of a global minimum corporate tax rate that countries can use to protect their tax bases. The two-pillar package will provide much-needed support to governments needing ... Read more

The European Commission has decided to appeal the decision of the EU General Court in the State Aid case of Apple and Ireland. According to the European Commission Ireland gave illegal tax benefits to Apple worth up to €13 billion, because it allowed Apple to pay substantially less tax than other businesses. In a decision issued july 2020 the General Court held in favor of Apple and Ireland. This decision will now be reviewed by the European Court of Justice. “Statement by Executive Vice-President Margrethe Vestager on the Commission’s decision to appeal the General Court’s judgment on the Apple tax State aid case in Ireland Brussels, 25 September 2020 “The Commission has decided to appeal before the European Court of Justice the General Court’s judgment of July 2020 on the Apple State aid case in Ireland, which annulled the Commission’s decision of August 2016 finding that Ireland granted illegal State aid to Apple through selective tax breaks. The General Court ... Read more

The agreement, according to which Facebook France will pay 106 million euros in back taxes and penalties, was reached after French tax authorities had carried out an extensive audit covering FY 2009-2018. Furthermore, Facebook’s French revenues were increased last year after the company decided to include advertising income from French companies in its local accounts, instead of declaring them in Ireland, where Facebook’s international operations are based. As a result, Facebook will pay 8.4 million euros in taxes in France this year – 50% more than last year. These changes are likely the result of efforts from the French government to have global online businesses pay more taxes locally ... Read more

Washington, DC – The United States Trade Representative announced today that his office is beginning investigations into digital services taxes that have been adopted or are being considered by a number of our trading partners. The investigations will be conducted under Section 301 of the 1974 Trade Act. This provision gives the USTR broad authority to investigate and respond to a foreign country’s action which may be unfair or discriminatory and negatively affect U.S. Commerce. “President Trump is concerned that many of our trading partners are adopting tax schemes designed to unfairly target our companies,” said USTR Robert Lighthizer. “We are prepared to take all appropriate action to defend our businesses and workers against any such discrimination.” US probe dig eco ... Read more

Google’s tax affairs are back in the spotlight after filings in the Netherlands have showed that billions of dollars were moved to Bermuda in 2016 using the “double Irish Dutch sandwich”. According to the Washington Post, Google’s cash transfers to Bermuda reached $27b in 2016. Google uses the double Irish Dutch sandwich structure to shield the majority of it’s international profits from taxation. The setup involves shifting revenue from one Irish subsidiary to a Dutch company with no employees, and then on to a Bermuda-mailbox owned by another company registered in Ireland. US According to US filings, Google’s global effective tax rate in 2016 was 19.3%. New US tax law will give companies such as Google an incentive to repatriate much of that cash by offering them a “one-time”, 15.5% tax rate on offshore funds. After that, foreign earnings will be taxed at 10.5%, with companies allowed to deduct foreign tax liabilities from this amount. The law will also impose ... Read more

Imposed and proposed unilateral measures to adress taxation of the Digital Economy CountryMeasurePercentageDecriptionEffective data Czech Republic DST (Law on selected digital services tax)The Czech Ministry of Finance submitted a finalized proposal to the Czech Government on Sept. 5, 2019, which is now pending the Czech Parliament’s approval. Effective date: to be determined, but likely sometime in 2020. January 18 - The Czech government approved a 7% digital tax proposal on Monday aimed at boosting state coffers by taxing advertising by global internet giants like Google and Facebook, the Finance Ministry said. The proposed tax, which still must make it past lawmakers in parliament, covers revenue gained from targeted advertising, providing digital market places, and user data sales.? 2020 FranceDST (Tax on certain services provided by the enterprises of the digital sector)Enacted on July 11, 2019, and entered into force on July 26, 2019. Retroactive from January 1, 2019 IndiaEqualization LevyEqualization levy at a rate of 6% applies to persons making ... Read more

Microsoft’s tax affairs have been in the spotlight of tax authorities all over the World during the last decade. Why? The setup used by Microsoft involves shifting profits from sales in the US, Europe and Asia to regional operating centers placed in low tax jurisdictions (Bermuda, Luxembourg, Ireland, Singapore and Puerto Rico). The following text has been provided by Microsoft in a US filing concerning effective tax and global allocation of income: “Our effective tax rate for the three months ended September 30, 2017 and 2016 was 18% and 17%, respectively. Our effective tax rate was lower than the U.S. federal statutory rate primarily due to earnings taxed at lower rates in foreign jurisdictions resulting from producing and distributing our products and services through our foreign regional operations centers in Ireland, Singapore, and Puerto Rico.“ “In fiscal year 2017, our U.S. income before income taxes was $6.8 billion and our foreign income before income taxes was $23.1 billion. In fiscal year 2016, ... Read more

Letter from the US treasury to the OECD concerning the proposed Unified Approach on taxation of the Digital Economy, and the reply to the letter from the OECD. treasury-letter-oecd-digital-services-tax Letter-from-OECD-Secretary-General-Angel-Gurria-for-the-attention-of-The-Honorable-Steven-T-Mnuchin-Secretary-of-the-Treasury-United-States ... Read more

Public prosecutors in Italy have opened a preliminary probe into the taxation of Netflix on the basis that servers and cables constitute a digital infrastructure that makes revenues taxable under Italian law. Italian media, Corriere della Sera, says that the prosecutors are working with Italy’s fiscal police to determine whether revenues from Netflix’s estimated 1.4 million Italian subscribers are subject to Italian taxation, even though Netflix operates out of the Netherlands. Italian prosecutors have recently also probed into the taxation of other U.S. tech giants such as Apple, Amazon and Facebook and collected a reported €5 billion-plus in back taxes. “Netflix does not pay taxes” the investigation in Milan starts. However, unlike the previous cases, Netflix have no companies, offices or employees in Italy. But still, Netflix earns millions selling streaming services to Italian customers. According to the prosecutor cables, fiber optics, computers, servers and algorithms have now replaced traditional factories and production facilities. Netflix has said that it is ... Read more

In the annual report for 2018 Facebook Inc. has included the following statement on current tax disputes with the IRS. “…The tax laws applicable to our business, including the laws of the United States and other jurisdictions, are subject to interpretation and certain jurisdictions are aggressively interpreting their laws in new ways in an effort to raise additional tax revenue from companies such as Facebook. The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for valuing developed technology or intercompany arrangements, which could increase our worldwide effective tax rate and harm our financial position, results of operations, and cash flows. For example, in 2016, the IRS issued us a formal assessment relating to transfer pricing with our foreign subsidiaries in conjunction with the examination of the 2010 tax year, and although we disagree with the IRS’s position and are contesting this issue, the ultimate resolution is uncertain and, if resolved in a manner unfavorable to ... Read more

Apple has agreed to paid an additional 571 million euros to France in a settlement with the tax authorities. According to the French news agency, l’expansion l’Express – “For several months now, secret negotiations on this subject have been taking place between Apple and the French International Audit Department (DVNI). But it is not until the end of December 2018 that a confidential agreement was reached. The subject of the negotiations has been the limited revenues and the low taxes paid by Apple in France for the last ten years.” A similar agreement was entered by Apple in the UK and Apple in Italy ... Read more

US Gaming Giant, Activision Blizzard Inc. – known for games such as World of Warcraft and Diablo – is and has been involved in several major transfer pricing disputes – with the US, French, UK, and Swedish tax authorities. In a 10Q filing with the US Securities and Exchange Commission from November 2018 the following information was provided by the company on pending tax cases. “Activision Blizzard’s 2009 through 2016 tax years remain open to examination by certain major taxing jurisdictions to which we are subject. During February 2018, the Company was notified by the IRS that its tax returns for 2012 through 2016 tax years will be subject to examination. In September 2018, the IRS concluded its examination of our 2009 through 2011 tax years. The Company also has several state and non-U.S. audits pending, including the French audit discussed below. In addition, as part of purchase price accounting for our 2016 acquisition of King, the Company assumed $74 ... Read more

Major US MNE’s with regional Headquarters in Ireland for European business activities. The corporation tax rate in Ireland is only 12.5%. However to further sweeten the deal for MNE’s, Ireland has been known to offer special tax deals to MNE’s resulting in much lower effective tax rates. Ireland provides MNEs with both low tax centers for European activities and conduit holding companies serving as hubs for transferring profits and capital to low tax jurisdictions such as Cyprus and Bermuda. Especially MNEs within the IT sector have been known to use a combination of subsidiaries in Ireland, Luxembourg, the Netherlands, and Bermuda to reduce their taxes (“Double Duch Irish sandwich”). Ireland has been involved in investigations concerning corporate taxes in both the EU and US. An investigation of Apple discovered that two of the company’s Irish subsidiaries were not classified as tax residents in the U.S. nor Ireland, despite being incorporated in Ireland. Ireland offers low tax, many tax treaties, low ... Read more

The dispute between Amazon and the French tax authorities relates to transfer pricing in fiscal years 2006 to 2010. Amazon has been accused of tax avoidance in the EU by channeling all local sales through Luxembourg. This set up has been changed in France, where Amazon in 2015 established a branch where all retail sales, charges and profits in France are booked. In October 2017 the EU commission decided that Luxembourg’s arrangement with Amazon is in conflict with EU State Aid regulations and ordered Luxembourg to recover 250 million euros in back taxes from Amazon. This decision has later been challenged by Luxembourg ... Read more

Apple has paid an additional £136m taxes in a settlement with the UK. The settlement is revealed in Apple Europe’s 2017 accounts. “Following an extensive audit by Her Majesty’s Revenue and Customs (HMRC) the Company agreed to pay a corporate income tax adjustment of £136m covering prior years up to September 26, 2015. This payment of additional tax and interest reflects the Company’s increased activity and is recognized in the current financial period which ended on 1 April 2017. As a result of this adjustment the Company’s corporate income tax payments will increase going forward.” Most likely, the HMRC has found that the UK subsidiary had not received a large enough sales- and marketing commission from the Irish Apple sales hub ... Read more

In a public hearing held 22 August 2017 in Sydney Australia by the Economics References Committee, tech companies IBM, Microsoft, and Apple were called to the witnesses stand to explain about tax avoidance schemes – use of “regional headquarters” in low tax jurisdictions (Singapore, Ireland and the Netherlands) to avoid or reduce taxes. Follow the ongoing Australian hearings into corporate tax avoidance on this site: http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/Corporatetax45th Transcript from the hearing: Tax Avoidance, Australian Senate Hearing, 22 August 2017 ... Read more

By Javier Garcia-Bernardo, Jan Fichtner, Frank W. Takes, & Eelke M. Heemskerk Multinational corporations use highly complex structures of parents and subsidiaries to organize their operations and ownership. Offshore Financial Centers (OFCs) facilitate these structures through low taxation and lenient regulation, but are increasingly under scrutiny, for instance for enabling tax avoidance. Therefore, the identifcation of OFC jurisdictions has become a politicized and contested issue. We introduce a novel data-driven approach for identifying OFCs based on the global corporate ownership network, in which over 98 million firms (nodes) are connected through 71 million ownership relations. This granular firm-level network data uniquely allows identifying both sink-OFCs and conduit-OFCs. Sink-OFCs attract and retain foreign capital while conduit-OFCs are attractive intermediate destinations in the routing of international investments and enable the transfer of capital without taxation. We identify 24 sink-OFCs. In addition, a small set of countries – the Netherlands, the United Kingdom, Ireland, Singapore and Switzerland – canalize the majority of corporate ... Read more

16. Primero is the parent company of an MNE group engaged in the pharmaceutical business and does business in country M. Primero develops patents and other intangibles relating to Product X and registers those patents in countries around the world. 17. Primero retains its wholly owned country N subsidiary, Company S, to distribute Product X throughout Europe and the Middle East on a limited risk basis. The distribution agreement provides that Primero, and not Company S, is to bear product recall and product liability risk, and provides further that Primero will be entitled to all profit or loss from selling Product X in the territory after providing Company S with the agreed level of compensation for its distribution functions. Operating under the contract, Company S purchases Product X from Primero and resells Product X to independent customers in countries throughout its geographical area of operation. In performing its distribution functions, Company S follows all applicable regulatory requirements. 18. In the ... Read more

In June 2017, the Indonesian government announced that it had settled a lengthy tax dispute with Google for 2016. While the settlement sum has not been disclosed, it is perceived as setting a new tone in the interpretation of permanent establishment status for tech companies ... Read more

Google has agreed to pay 306 million Euro to the Italian authorities in a transfer pricing dispute related to years 2009 – 2013. The dispute was one of several initiated due to the billions of dollars in sales to European consumers and Googles lack of tax payments in Europe. Google has already settled with the UK, paying 130 million in back taxes in 2016 to end an long lasting audit. Other disputes still remain elsewhere in Europe. The settlement follows an agreement reached in 2015, where Apple paid 300 million Euro to the Italian tax authorities. aggressive tax avoidance ... Read more

The US Treasury in 2016 strongly criticized the European Commission for it’s state aid actions relating to US Corporations; Apple, Starbucks, Amazon, and McDonald’s. US Treasury white paper of August 2016 US White-Paper-EC-State-Aid August 24, 2016 US Treasury letter of February 2016 US Treasury letter of February 2016 EC state aid rulings ... Read more

Apple has agreed to paid an additional 347 million dollars to Italy in a settlement with the tax authorities. A spokesperson for the Italian tax office says that Apple is paying the sum to end the investigation, and that it is in line with what the agency had asked for — although substantially less than the €880 million Apple has been accused of withholding for sales booked in Italy. A similar agreement has later been entered into by Apple in the UK and Apple in France ... Read more

The European Commission has opened an in-depth investigation to examine whether the decision by Luxembourg’s tax authorities with regard to the corporate income tax to be paid by Amazon in Luxembourg comply with the EU rules on state aid. The opening of an in-depth investigation gives interested third parties and the Member States concerned an opportunity to submit comments. It does not prejudge the outcome of the investigation. The tax ruling in favour of Amazon under investigation dates back to 2003 and is still in force. It applies to Amazon’s subsidiary Amazon EU Sàrl, which is based in Luxembourg and records most of Amazon’s European profits. Based on a methodology set by the tax ruling, Amazon EU Sàrl pays a tax deductible royalty to a limited liability partnership established in Luxembourg but which is not subject to corporate taxation in Luxembourg. As a result, most European profits of Amazon are recorded in Luxembourg but are not taxed in Luxembourg. The ... Read more

Follow the work of the UK Parliament, House of Commons Committee of Public Account, on corporate tax avoidance schemes. http://www.parliament.uk/business/committees/committees-a-z/commons-select/public-accounts-committee/taxation/ Statements from Amazon, Google and Starbucks, November 2012 UK Parlement, September 2012 Google Amazon Starbucks Statement from Google June 2013 UK Parlement, June 2013, Tax Avoidance–Google ... Read more