– DAGTVA truth table –
DAGTVA® – Distribution of MNE profits
|No.||Problems exposed, requests, constraints and subjects||Origin||Pg||Li||Doc|
|49||Mt A – fraction of the presumed residual profit of the EMN group.||Pillar 1||9||10||RBMaf|
30. Against that background, the “Unified Approach” proposes the following three tier mechanism:
Amount A – A new taxing right for market jurisdictions over a portion of within the scope MNE groups’ deemed residual profit (RBMaf – RBMag). This could potentially be calculated on a business line basis. In broad terms, this deemed residual profit (RBMag) would be the profit that remains after allocating what would be regarded as a deemed routine profit on activities to the countries where the activities are performed. This would be determined by simplifying conventions, and require the determination of the level of the deemed routine profit and also a decision on the proportion of the deemed residual profit that should go to the market, which in turn would be allocated to particular markets meeting the new nexus rule through a formula based on sales (RBMac). Percentages remain to be determined and would be part of the consensus-based agreement among Inclusive Framework members (RBMai).
With DAGTVA calculation of transfer prices . As it is writted in many pages including RBPpi of this proposal, no fraction of the profits will be attributed to a market jurisdiction until they have been able to be quantified and if, once quantified, there will remain a valid reason for tax them. It is a better distribution of these benefits among the States that will normally provide for this. There is therefore nothing to modify on direct taxation, nothing to negotiate in this area as we can read in the RBMap page :
Regarding the distribution of profits :
As clarified on the RBSju page, the DAGTVA transfer pricing calculation takes into account in the « Amount A » mechanism, not only residual profits, but also standard, routine and intangible profits, from the moment they are invoiced, they are treated for tax purposes in the same time of the transaction, it is the advantage of the transactional system where the totality of the taxation is definitively affected for the respective shares in each State where the commercial activity takes place. And we are talking about direct taxation which can be levied without modifying existing local taxation laws.
There is therefore nothing to renegotiate in this area of responsibility of each sovereign State, there is no new right to impose and modify direct taxation, with a simple system and the ease of having a majority international agreement in this area. You will see in the balancing calculations of international taxation set out in the document , that only part of the indirect taxation, that which must be paid by the consumer in the market State, is returned to the latter, under conditions which can be very restrictive as in the “Amount C” option.