Proposal for a Global Taxation System
– DAGTVA truth table –
DAGTVA® – Distribution of MNE profits
|No.||Problems exposed, requests, constraints and subjects||Origin||Pg||Li||Doc|
|69||Qe – complex obligations with amount A for a non-resident entity.||Pillar 1||10||42||RBQoc|
Quote : 2.5. Pending key questions
Other implementation issues.
39. Where the tax liability for Amount A is assigned to an entity that is not a resident of the taxing jurisdiction, enforcement and collection could be more complex (RBQoc). It is worth exploring whether a withholding tax would be an appropriate mechanism for the collection of the designated Amount A (RBQrs). However, if countries choose to use it (and as an administrative mechanism to simplify and assure the collection of an underlying taxing right, it would be a matter for domestic law) it would be necessary to agree the features of the system of withholding (RBQsc) that jurisdiction could commit to apply.
With DAGTVA an MNE cannot trade without having a permanent establishment in the market jurisdiction as shown in the RBMcm section which:
“Following the 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 .
Open the slide show in reference:
- 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 in correspondence with the references of the tax statements 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!
It is therefore with the precision of the transactional system of the new DAGTVA transfer pricing calculation , that the tax authorities in each jurisdiction will fully understand the level of taxation to be applied to the transaction with obvious simplicity and as specified in the section RBQct .
With regard to withholding tax, this option may be implemented by each jurisdiction. This is an option which was developed by DAGTVA in the context of Brexit where this taxation is applied at the billing level, with sellers being paid net amount(1), would only cover the part of indirect taxation, nothing changes in terms of corporate taxes and direct taxation, except the perfect knowledge of turnover which is at the origin of this taxation.
(1) This process preserve the policies of the Good Friday Agreement between the two Ireland in 1998 and was retained and put in application with the « Northern Ireland Protocol » exposed by the Chancellor of the Duchy of Lancaster, Michael Gove, at the Commons the May 20, 2020.
While it is not the topic of this page the precedent decision of UK Parliament prefigure the future of tax relations between States with a better single market in EU in a single process which is the next modern of international taxation claimed by the G20.