– DAGTVA truth table –
DAGTVA® – Distribution of MNE profits
|No.||Problems exposed, requests, constraints and subjects||Origin||Pg||Li||Doc|
|43||Mt A – Set new rules of profit distribution.||Pillar 1||8||39||RBMar|
27. As noted, given that the new taxing right would create a nexus for an MNE group even in the absence of a physical presence (RBEla – RLPph – RLCpp – RLNet), it would be impossible to use the existing rules to allocate profit to this new nexus (RBAbt) in cases where no functions are performed, no assets are used, and no risks are assumed in the market jurisdictions. Therefore, new profit allocation rules are required for Amount A (RBMar).
As is detailed in the RBMap page, first we must consider to obtain fiscal legal certainty by wanting to retrocede to a market State profits of any kind, legally acquired, is neither the problem nor the business of an MNE, but that of a State which is aware about the turnover achieved locally by these MNEs and has not properly taxed companies operating in its territory in order to need to be returnded all or part of the taxes collected elsewhere, to balance its incomes.
It is not the role of an MNE to return a profit margin legally acquired in another jurisdiction. How and by what right would it do it?
But we see that in the DAGTVA calculation of transfer prices , there is no planned retrocession of profits, whether they are residual or not and that the notion of presumed by this fact does not exist and even could not exist due to the accounting accuracy of the cross-border transaction in a transactional tax system. With DAGTVA, there is no retrocession of the direct taxation of MNEs comes from the sharing of this taxation into a tax on profits better distributed in each State concerned by the transaction.
The DAGTVA process makes this retrocession unnecessary in B²B transactions, due to the fact that a permanent establishment recognized in the market jurisdiction where the MNE will be taxed at the level that the local tax authorities have decided, if is required.
We can also read in the RBMcs section :
« From a pure tax standpoint, the fact of wanting to return an additional profit in a foreign jurisdiction can only be done at the level of the State tax authorities and in no case as explained below by the MNE, which would imply that firstly, this profit was calculated by the local tax authorities, following a tax declaration by the local entity of the MNE (which is not certain) and necessarily over a very long tax period over accounting years which can be fenced. Secondly that this taxable additional benefit identified was notified, by return, to the MNE, with a transfer of it at destination a foreign jurisdiction, where the execution of the latter will be difficult to control, the whole with an impossible approval of the authorities of taxation on the part of the recalcitrant States with the transparency and the shipment of a fiscal windfall to which they are very ‘attached’! If such processes were put in place,MNEs would manage to declare substantial profits to be returned in tax havens with a worse situation than before! »
Note: This section does not deal with B²C transactions where a business, which may be an MNE, sells to an end consumer in a market State where it has no physical presence. This subject is treated globally in this page by referring to B²C slideshows like this one , but also in sections which make the device applicable in all the conditions of its internationalization but does not authorize, except agreement of the taxation authorities (slide show in reference – slide 14) in accordance with Article 7 of the OECD conventions , to allow an ultimate consumer to export a product he has sold.