– DAGTVA truth table –
DAGTVA® – Distribution of MNE profits
|No.||Problems exposed, requests, constraints and subjects||Origin||Pg||Li||Doc|
|35||New rules for distribution of profits – General concepts.||Pillar 1||6||19||RBNge|
Follows the need to revise the rules on profit allocation (RBNge) as the traditional income allocation rules would today allocate zero profit to any nexus not based on physical presence…
In the DAGTVA transactional model and in the DAGTVA transfer pricing calculation, profits are distributed proportionately in States between which the transaction takes place and in accordance to the level of each local tax pressure.
With DAGTVA, the days when a tax haven received turnover and hosted profits from companies located in other jurisdictions where they only have a letterbox, those days are over!
This calculation requires the entity of an MNE, to have a permanent establishment or the authorization to trade in each State of activity, which creates a default link rule, but also to comply with the tax rules locally applied. There is no longer any escape the taxation of local activities. This last observation will force, not without problems, the tax havens to tax locally in order to have the financial means to return the part of sale taxes where they must be retroceded, in market States!
- 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 that sale is authorized by the buyer’s State in special circumstances where the seller would not have a physical presence. The main thing for this 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.