– DAGTVA truth table –
DAGTVA® – Distribution of MNE profits
|No.||Problems exposed, requests, constraints and subjects||Origin||Pg||Li||Doc|
|64||Qe – dispositions MNE double taxation provisions by entity and country.||Pillar 1||10||20||RBQdd|
Quote : 2.5. Pending key questions
Elimination of double taxation
36. Because the existing domestic and treaty provisions relieving double taxation apply to multinational enterprises on an individual entity and individual country basis (RBQdd), the implementation of the proposed approach would require the identification of the member(s) of an MNE group that should be treated as owning the taxable profit in such market jurisdictions under Amount A (RBQdg) (e.g. entity(ies) with high profitability, entity(ies) owning certain intellectual property (IP)). In particular, it will be important to explore to what extent identifying the relevant taxpayers and the relevant profit to be reallocated would allow existing mechanisms for eliminating double taxation (RBQme) to continue to operate effectively. This would involve how domestic and treaties rules to relieve double taxation could operate under the “unified approach” (RBQrd).
« the existing domestic and treaty provisions relieving double taxation apply to multinational enterprises on an individual entity and individual country basis, »
With transactional taxation and DAGTVA transfer pricing calculation, it is impossible for double taxation to be found. The taxation will always be proportional to the business activity noted in each jurisdiction. In the comments about the return of a fraction of sale taxes in market States, by definition applied on the indirect taxation, the part which will be levied in one jurisdiction will be automatically returned to the other entity of EMN in the other jurisdiction (Wayfair decision applied in the same entity). For paraphrasing and compare the MNE with a person, it is to take off the money in the left pocket to put it in the right with the nil result and no double taxation in this area ,thus proving, in the proposal, that this indirect taxation does not impact the business world in the transnational context of MNEs and that the DAGTVA technical device asserts its international qualities of the Value Added Taxation system. Without worrying about the tax system in application in each jurisdiction.
DAGTVA will still impose, by default, this system with a Value Added Taxation on multinational cross-border transactions, hence the proposal of a global taxation system (1). This does not mean that each jurisdiction will be obliged to abandon the direct and indirect taxation that it already applies, nothing changes at this level. There would be, in the context of a global agreement on taxation, nothing to negotiate in this domain.
You will also notice that it is the States which return the sale taxes without impacting the MNEs.
As stated in the question of this page, the transactional taxation is necessarily applies between entities of MNEs and between jurisdictions involved in the transaction.
You will note that the banking system is not involved since 2018 in the new DAGTVA process and leaves it full latitude to honor the obligations that MNEs will have to face in this new process. Indeed in the slide show in reference, the representation of the banking system is symbolic and may not necessarily reflect the reality of the headquarters or the banking configuration of an MNE. On the other hand, the tax authorities of the two jurisdictions involved in the transaction will be fully aware of the movements of funds that will take place within this banking system, a form of application of the BEPS directives by default in the real time process, without the need for to request information in case of problem!
(1) – This is what will allow the United States to enter with the standardization of the WSTAX in the VAT system, without them having the obligation to modify the Constitution with an agreement that would have been impossible to find and without having to pronounce this word of « VAT » banned in the US!