– DAGTVA truth table –
DAGTVA® – Distribution of MNE profits
|No.||Problems exposed, requests, constraints and subjects||Origin||Pg||Li||Doc|
|57||Mt C – mechanisms binding and effective dispute resolution.||Pillar 1||9||31||RBMcm|
30. Against that background, the “Unified Approach” proposes the following three tier mechanism:
Amount C – Any dispute between the market jurisdiction and the taxpayer over any element of the proposal should be subject to legally binding and effective dispute prevention and resolution mechanisms (RBMcm). This would include those cases where there are more functions in the market jurisdiction than have been accounted for by reference to the local entity’s assumed baseline activity (which is subject to the fixed return in B above) (RBMcf), and that jurisdiction seeks to tax an additional profit on those extra functions in accordance with the existing transfer pricing rules.
Following the next RBMcs section which deals with this subject but on the possible attribution of residual profits and which provides other answers, you will see that the DAGTVA calculation of transfer prices is so precise that it prevents any different linked to elements of the proposal as explained in the section devoted to the « Amount A » option .
- Authorization to continue the transaction (slide 14), the exporting company must normally be registered(*) with its tax authorities so that they give the export authorization in compliance with the agreement of the OECD article 7,
- When this authorization is given, a copy for the first information is sent to the tax authorities of the market State in order they analyze the transaction put in reserve for a next treatment(1).
- These should expect a purchase declaration (in B²B) which will occur on slide 15,
- Declaration of equality of controlled declarations in slide 16,
- Automatic exchange of BEPS information between the two States and production of export / import bar codes in slide 22,
(*) – But it is possible the sale is authorized by the buyer’s State in special circumstances where the seller would not have a physical presence. The main thing for the buyer’s State is to be informed the existence of the transaction which will allow its to receive the sale taxes as specified below by the production of import bar codes in slide 22,
(1) – In a B²C transaction, it is this process which makes it possible to validate the bar codes of the import documents which will authorize this importation but above all it is this process which allows the market state to know of the transaction and import authorizations do not come from fraud. There must be correspondence in the references of the tax returns in slide 21. If the transaction takes place from a tax haven (in the declarative tax system slideshow above), this State can no longer escape the declaration procedure, it is up to it to tax the sale or not.
But if for various reasons the tax return is not made and the tax not locally levied, the market State will want its consumer’s sale taxes to be returned to it and the production tax haven will then have to pay these taxes on its own funds to comply the law!
We can see that the two tax authorities are in constant communication when declaring a transfer price and that DAGTVA clearly sets the rules of the tax game. In case of drift of ‘non-cooperative’ States, they would be ‘punished’ instantly as explained in this article devoted to a new international regulation by taxation, but also one of the two taxation authorities could decide to stop the transaction at level of its declaration, if the information transmitted does not fit into a shared tax ethics.
This regulation with DAGTVA would therefore be legally binding by default. It could range from the sequestration of sale taxes to be returned in the market state, to the prohibition on trading one way or the other. Such decisions could be taken concerning the world taxation system, implying in fact a Single World Market and applied by directives, under cover of international bodies as it is explain in the article as exemple.