“WHAT IS YOUR SUBSTANCE, WHEREOF ARE YOU MADE”?

IS TAX PLANNING TRULY ON YOUR BOARD’S AGENDA?

As the OECD begins developing its ‘Action Plan’ to tackle tax avoidance and profit shifting, it is essential that multinationals’ Boards align tax structure and their business operations closely to avoid scrutiny and reduce tax risks. This topic was discussed today at the Taxand global conference 2013, hosted by Alvarez & Marsal Taxand US in New York.

Frédéric Donnedieu de Vabres, Chairman of Taxand, the world’s largest independent global organisation of specialist tax advisors to multinational businesses, provides an overview of the session:

“Given how much the world has evolved it’s remarkable that the laws that govern tax residency have seen little change since they were formulated in the early 1900s. The paradigm shift in technology, travel and international markets makes it almost impossible to apply these laws to modern business. Companies run the risk of heightened scrutiny, increased investigations, the potential of double taxation scenarios and huge financial penalties imposed by tax authorities for not abiding to rules around residency, beneficial ownership and permanent establishment.

“The location of taxable profits, or ‘permanent establishment’, is increasingly complex for multinationals particularly those with intangible assets. Most companies will maintain that they are controlled through their board meetings, with these meetings taking place where both central management and the company itself reside for tax purposes. But is that always the case?

“With the prevalence of flexible and remote working, companies are running the risk of violating residency rules by making crucial business decisions remotely. In the context of a board meeting, where a key participant is joining by telephone or video conference, it might be that their exact location at the time will become critical in determining where a key business decision was taken.

“More than ever, companies need to be comfortable with the entire structure of their business activities to show sufficient substance at all levels. With decision making processes increasingly under scrutiny, Director liability is on the rise. And with political and public scrutiny heightened and influencing corporate reputations, letterbox and conduit companies are no longer a viable option. More than ever tax planning must be on the Board’s agenda as an integral part of commercial decision making. Having a considered strategy in place with the right people, the right location, the right documents, at the right time is crucial to ensure multinationals can pass increasingly challenging substance requirements, worldwide. “

Robert N. Lowe, CEO, Alvarez & Marsal Taxand US and conference host said:
“As the public’s attention to fiscal issues has increased worldwide, there is a real need to reconsider the role of the board in the tax planning process to a greater degree than ever before. While historically, tax procedures have been viewed as part of the financial function, tax executives are increasingly engaging the board, which signals a shift in the tone of organisations.”

ABOUT TAXAND GLOBAL CONFERENCE 2013
The Taxand Global Conference 2013 “Leadership in an Uncertain Global Economy” is being held in New York, 24 – 26 April 2013. Tax advisors and clients from across Asia, Europe and the Americas have come together to discuss the most pertinent global tax issues affecting multinational CFOs and Tax Directors. The delegate pack including key pointers for multinationals worldwide, case studies, surveys and more will be available on www.taxand.com post event providing a truly global perspective for tax reporters.

ABOUT TAXAND
Taxand provides high quality, integrated tax advice worldwide. Our tax professionals, nearly 400 tax partners and over 2,000 tax advisors in nearly 50 countries – grasp both the fine points of tax and the broader strategic implications, helping you mitigate risk, manage your tax burden and drive the performance of your business.

We’re passionate about tax. We collaborate and share knowledge, capitalising on our expertise to provide you with high quality, tailored advice that helps relieve the pressures associated with making complex tax decisions.

We’re also independent—ensuring that you adhere both to best practice and to tax law and that we remain free from time-consuming audit-based conflict checks. This enables us to deliver practical advice, responsively.

Taxand has achieved worldwide market recognition. In the International Tax Review’s (ITR) World Tax 2013, 43 Taxand locations were commended. 35 countries were voted top in the ITR Transaction Tax Survey 2012 and in the ITR Tax Planning Survey 2012. Taxand has received 48 national awards and 15 regional awards in the ITR European, Americas and Asia Tax Awards since 2009. These include European Private Equity Tax Firm of the Year, European Indirect Tax Firm of the Year, European Tax Policy Firm of the Year, Asia Transfer Pricing Firm of the Year, Asia Tax Policy Firm of the Year, North America Indirect Tax Firm of the Year, and Latin America Tax Disputes Firm of the Year. Full details of awards can be viewed at www.taxand.com/media/factsheet.